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A Landmark Legal Decision exposes unfair Tendering Practices

A victory was scored by a supplier in late July 2015, with a High Court decision against a Ministry that breached Government’s Procurement Rules. The tendering decision was overturned, and all legal costs of the plaintiff were borne by the defendant.

The Problem Gambling Foundation has successfully challenged a tendering decision by the Ministry of Health, on the basis of flawed methodology, lack of transparency, and conflicts of interest.

What were the Issues?

The key areas identified by the plaintiff and agreed by the judge were:

  • The evaluation process described in the RFP was not followed. Some evaluation criteria and weightings were changed, added and removed after the submissions were received. No notification was given to bidders about these changes. Also, an additional moderation process was employed after the evaluators had scored and ranked the bids, that was not described in the RFT.
  • The evaluation scoring was flawed. Some panel members did not score some criteria. The convener of the panel dealt with this by changing their non-responses to zero scores, thereby reducing the overall scores of the affected bids. We also note that there was wide variation in the individual scores awarded by panel members, indicating that a consistent and agreed scoring system had not been set up in advance of individual scoring.

Later, in discussions with the panel members, the Evaluation Chair achieved a consensus for overall scoring for each bidder on all criteria. However, there was concern expressed by the Judge that undue influence had been exerted on the panel members in the process of achieving consensus.

  • Conflicts of Interest were not eliminated. Five of the seven panel members identified potential conflicts of interest. The applicable rules stated that conflicts of interest needed to be eliminated; which would have required those panel members with knowledge or relationships with some of the bidders to retire from the panel. Those panel members however did not retire, which constituted a breach of the Government Rules of Procurement.

Interestingly, in discussing the management of conflicts of interest, the judge coined a new phase ‘the Personal Knowledge Exclusion Rule’. This effectively requires tender evaluators to completely exclude any personal knowledge they have of the bidders and make their judgements solely on the basis of the written submission. The ‘Personal Knowledge Exclusion Rule’ introduced in this case will no doubt prompt debate, as many government RFTs openly state that evaluators may use their personal knowledge of the bidders to influence their scoring.

What can we learn from this?

This case is heartening news for tenderers, and a sobering cautionary tale for tender evaluators.

The messages are clear for government sector tender evaluators:

  1. Follow the process described in the RFT
  2. Manage the scoring systems fairly and transparently
  3. Deal with conflicts of interest: Obey the ‘Personal Knowledge Exclusion Rule’

For bidders, this case is sound evidence that we can expect support from the justice system if procurement processes are flawed and/or biased. While the effort that the Problem Gambling Foundation went to in order to achieve this victory was undoubtedly massive, the Court’s decision in their favour creates a welcome precedent that will do much to guide public procurers in fair practice.

Interested in finding out more? You can read the full judgement here

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