Using a well-drafted request document in a procurement process
is paramount to conducting a sound process. The request document
should provide proponents with the information required to lodge a
value for money submission and should also provide the requesting
agency with the rights necessary to deal with a range of
circumstances that may arise during the process. Anyone who has
experience in procurement processes will know that situations
beyond what could have reasonably been contemplated when the
process started can (and do) arise during the process.
This is demonstrated by the circumstances that led to the
decision in Karimbla Properties (No 50) Pty Ltd v State of New
South Wales & Anor  NSWSC 778. UrbanGrowth NSW, a
state-owned corporation, conducted the expression of interest phase
of a process for the sale of land (stage one). UrbanGrowth had
resolved to begin stage two of the process and that it would invite
Karimbla (a company forming part of the Meriton Group) to
participate, along with other proponents. On the same day the
resolution was passed by UrbanGrowth's board, one of
UrbanGrowth's senior executives who had been heavily involved
in the process resigned. UrbanGrowth later learned that the
ex-employee had taken up a position with Meriton.
UrbanGrowth excluded Karimbla from stage two on the basis that
allowing Karimbla to continue would compromise the process. This
was due to a risk that the employment of an ex-UrbanGrowth senior
executive by Meriton could be viewed as a conflict of interest, or
perceived as giving Karimbla an unfair advantage over other
Karimbla sought an interlocutory injunction to restrain the
exchange of contracts for the sale of the land, pending a final
decision. Karimbla's challenge was based on an alleged breach
of procedural fairness or, alternatively, an alleged breach of a
contractual duty of good faith, said to be owed by UrbanGrowth to
Karimbla under an implied process contract.
Justice Beech-Jones of the NSW Supreme Court found there were
low prospects of Karimbla establishing a breach of an obligation by
UrbanGrowth to afford Karimbla procedural fairness (if there even
was such an obligation). His Honour also found there were poor
prospects of Karimbla establishing a breach of an implied process
contract (the foundation of which was said to be shaky) or that,
but for those breaches, Karimbla would not have been excluded from
stage two. This was based on his Honour's view
that—regardless of Karimbla's or its executive's
intentions and whether any confidential information was actually
disclosed—the fact that during the evaluation process a
senior UrbanGrowth executive responsible for the evaluation
commenced work with one of the bidders, had the potential to
undermine confidence in the process.
Preparing the request document
While a final decision has not been handed down, the reasoning
in the interlocutory judgment supports the approach taken by
UrbanGrowth in excluding Karimbla. To ensure that you are able to
take action, if necessary, to preserve the integrity of a
procurement process, bear in minding the following tips when
preparing the request document:
make sure that the request document reserves the right to
exclude a proponent in specified circumstances
don't construe the circumstances in which a proponent may
be excluded too narrowly
refer to potential or perceived conflicts of interest as well
as actual conflicts of interest, and
ensure that the right to exclude a proponent is exercisable at
the absolute discretion of the agency conducting the procurement
process, without the need to give the relevant proponent an
opportunity to "show cause" or to provide reasons.
Whether or not such rights can be exercised (and the manner in
which they can be exercised) will depend on the particular
circumstances under consideration, but the starting point is to
include sufficient rights in your request document, so that you
have the ability to act if the circumstances require it.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This decision has implications for Government authorities and corporations, and for private sector project proponents.
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