Local Governments have a duty to act fairly to all tenderers
Legal precedent has established that Local Governments, as public bodies, have a responsibility to treat tenderers fairly. This obligation is based upon the terms and conditions of the tender having 'contractual force'; with an implied duty on Local Governments to act fairly to all tenderers. Fair and appropriate processes must be followed and reasons given to justify decisions made on the awarding of tenderers.
Obligations regarding tenders in legislation
The obligations of Local Governments in regard to tenders for providing goods or services are to be found in Section 3.57 of the Local Government Act 1995 ('the Act) and Part 4 of the Local Government (Functions and General) Regulations 1996 ('the Regulations').
Basic rule: purchases over $100,000 require a public tender
Public tenders must be called before a Local Government enters into a contract for the supply of goods or services if the value of a purchase is or is expected to be $100,000 or more, unless one of the exclusions listed below from Regulation 11 (2) applies: - the supply of the goods or services is to be obtained from expenditure authorised in an emergency under section 6.8(1)(c) of the Act;
- the supply of the goods or services is obtained through the Services Programme of Western Australian Local Government Association;
- the Local Government intends to enter into a contract arrangement for the supply of good or services where-
- the supplier is either
- an individual whose last employer was the Local Government; or
- a group, partnership or company comprising at least 75% of persons whose last employer was that Local Government:
- the contract-
- is the first contract of that nature with that individual or group; and
- is not to operate for more than 3 years; and
- the goods or services are-
- goods or services of a type; or
- (in the opinion of the Local Government) substantially similar to, or closely related to, goods or services of a type, that were provided by the individual (or persons) whilst employed by the Local Government;
- within the last 6 months-
- the Local Government has, according to the requirements of this Part, publicly invited tenders for the supply of the goods or services but no tender was submitted that was thought to meet the tender specifications: or
- the Local Government has, under regulation 21(1), sought expressions of interest with respect to the supply of the good or services but no person was, as a result, listed as an acceptable tenderer;
- the contract is to be entered into by auction after being expressly authorized by a resolution of the council of the Local Government;
- the goods or services are supplied by or obtained through the government of the State or the Commonwealth or any of its agencies, or by a Local Government or a regional Local Government;
- the goods or services are to be supplied-
- in respect of an area of land that has been incorporated in a district as a result of an order made under section 2.1 of the Act changing the boundaries of the district; and
- by a person who, on the commencement of the order referred to in subparagraph (i), has a contract to supply the same kind of goods or services to the Local Government of the district referred to in that subparagraph;
- the Local Government has good reason to believe that, because of the unique nature of the goods or services required or for any other reason, it is unlikely that there is more than one potential supplier; or
- the goods to be supplied under the contract are-
- petrol or oil; or
- any other liquid, or any gas, used for internal combustion engines.
Inclusions of options to renew in contracts resulting from tenders
Does a Local Government have to invite tenders where the consideration for the initial term of the contract is less than $100,000 but where the contract contains an option, the exercise of which would cause the consideration for the whole of the contract to exceed $100,000?
The nature of an option is the subject of legal controversy. There are two views as to the nature of an option. The first view is that an option is an offer to enter into a contract coupled with a contract that the offer will not be revoked during the time, if any, specified in the option. The second view is that an option is a conditional contract. Unless one of the exclusions in Regulation 11(2) applies, if the consideration for the initial term is $100,000 or more, or the consideration for the initial term and option term together is $100,000 or more, tenders should be publicly invited.
Regardless of what view is taken as to the legal nature of an option, and the time at which the contract is actually entered into, if a Local Government specifies in its invitation to tender the details of the option (the term of the option, the amount of the reward or the method in which the reward payable to the contractor is calculated), the Local Government will comply with the requirement in Regulation 11(1).
Anti avoidance provision
Under Regulation 12, a Local Government cannot avoid the requirement to invite tenders in Regulation 11(1) by breaking the contract matter into separate contracts each with a value less than $100,000, if the desire to avoid the tender requirements is a significant reason for not dealing with the matter in a single contract.
Regulations and purchases under $100,000
The Regulations set out the process that must be complied with in regard to tenders for the provision of goods or services where the consideration is or is expected to be worth more than $100,000. The Regulations do not provide for the requirements for the purchase of goods or services that are worth less than $100,000.
If tenders are invited (irrespective of the value) the Regulations apply
However, under Regulation 13, if a Local Government decides to invite tenders, although not required to do so by the Regulations, the tenders are to be publicly invited according to the requirements of the Regulations. |
