(25 October 1999)
Probity Aspects of Tendering
To minimise their potential liability when conducting tender processes, departments and agencies need to take various measures to ensure that a fair and proper process is undertaken. At the outset, the tender documents should be internally consistent and sufficiently comprehensive to permit tenderers to be able to make an informed decision about whether to submit a tender, and if so, to submit a tender capable of complying with the tender conditions.
Similarly, as the Hughes 1 and McMillan 2 cases show, agencies will need to ensure that tender processes, particularly tender evaluations, are undertaken consistently with the tender documents provided to tenderers, and that the basis of an evaluation is transparent on the face of the tender documents.
Need for a Probity Plan
An important strategy for ensuring a fair tender process is the establishment of, and compliance with, a comprehensive probity plan. The purpose of developing and giving effect to a probity plan is to ensure the overall fairness and integrity of the tender process.
This has been recognised by the Competitive Tendering and Contracting Group of the Department of Finance and Administration. Commonwealth Procurement Circular (CPC) 97/5 3 indicates that a probity plan is an important strategy to ensure fair dealing in tendering. As noted by the CPC, '[i]mplementation of a carefully drawn probity plan will make it more difficult for an unsuccessful tenderer to challenge the tender process on the grounds that the agency had breached the obligation to act fairly in the treatment of the tenderer.'
The probity plan will usually require the appointment of an independent probity adviser (sometimes called a 'probity auditor') to oversee and advise on all probity aspects of the tender process. The appointment of a probity adviser is a means of monitoring the conduct of the tender process to ensure the probity plan is complied with, and the tender process is conducted properly.
A probity adviser may be appointed under a probity plan to monitor and report on compliance with the plan. The probity adviser will usually be required to provide advice on the conduct of the tender process (including the tender evaluation procedures), ensure that the tender rules and procedures are followed, and ensure that the tender process will be conducted fairly and that the tenders received are assessed in accordance with the stated evaluation criteria. The probity adviser may be required to advise on the appropriateness of weighting particular evaluation criteria, and if so, it will be an important task of the probity adviser to ensure that the weightings are correctly applied during evaluation.
However, the probity adviser is not the legal adviser in relation to the tender process. The role of the probity adviser is to monitor the tender, evaluation and selection processes to ensure that they are defensible and that they are conducted in a fair and unbiased manner. The probity adviser does not undertake the evaluation and is not responsible for advising on the legal issues that arise from the conduct of the tender process.
The probity adviser will normally advise and report to the tender steering group, and may attend and monitor meetings of other tender committees, such as the tender evaluation team. The probity adviser may also be required to advise on the composition of the tender evaluation team to ensure that there are no conflicts of interest and that the team contains the appropriate skills for the evaluation.
The probity plan should ensure that the probity principles underpinning the tender process are observed, and that compliance with the principles can be audited as evidence that a defensible tender process has been conducted. Although the probity principles may vary depending on the nature and subject of the particular tender process, it might be expected that they would conform generally with some or all of the principles suggested below. The following list is not exhaustive:
- to ensure that all bidders are treated fairly and equitably, consistent with the rules of natural justice and procedural fairness
- to ensure that a defensible yet flexible tender and evaluation methodology/strategy is established which provides a means of meeting the requirements of Commonwealth financial management and accountability laws and policies, including the Commonwealth Procurement Guidelines
- to ensure that an effective process to protect all confidential information is established
- to develop guidelines with respect to particular probity issues, including conflicts of interest and fair dealing
- to ensure that all conflicts of interest issues are addressed as and when they might arise
- for outsourcing or privatisation tenders:
- to establish clear and defensible guidelines for dealing with any management or employee buyout arrangement or in-house bid, and
- to ensure compliance with obligations regarding consultation with affected employees and their representative organisations, and treatment of staff in accordance with the relevant workplace agreement
- to ensure effective contract risk management arrangements
- to minimise potential liability that may otherwise arise out of the conduct of a tender process
- to ensure a clear audit trail and confirm that there has been overall compliance with the probity plan.
Some Aspects of a Probity Plan
An important part of any probity plan will be to establish guidelines for dealing with prospective and actual tenderers during the tender process, including dealing with tenderer inquiries. It will be important to keep proper records of all inquiries from tenderers and others about the tender process. Contact with tenderers should be made only through authorised personnel, and there should be strict limits about what can be said in response to tenderers' inquiries. The plan should also deal with the issue of whether meetings can be held with tenderers at any stage before a decision is made, and if so, the establishment of guidelines about what can be discussed at those meetings.
There should also be guidelines for seeking and dealing with tender clarifications to ensure that they do not amount to an impermissible variation of the tender or the admission of late material, contrary to the conditions of tender.
Access to Tender Process Information
A probity plan should also address the arrangements for accessing information related to the tender process. Arrangements will need to be put in place to protect and maintain the security and confidentiality of the tender documentation, material received from tenderers, and the tender evaluation and recommendations. Procedures or protocols for staff access to tender documentation and for receipt of tender documentation will need to be put in place. These arrangements should include appropriate training for staff involved in conducting the tender process, or otherwise dealing with tenderers and potential tenderers. There will also need to be consistent and defensible arrangements for bidder access to information. This may involve industry briefing sessions, access to sites or key staff, and the dissemination of information to tenderers during the tender process.
Checks on Tenderers
The plan will also need to provide for the review of issues that may arise during a tender process, for example, determining the extent to which probity, financial and security checks will need to be conducted of tenderers. The AGS has good working relationships with regulatory bodies such as the Australian Securities and Investments Commission (ASIC) and the Australian Federal Police (AFP) who will undertake the necessary checks. These checks should be conducted even if the particular company involved may appear to be a financially solid, well-recognised and respected organisation. For example, the checks could reveal that the company engages in anti-competitive or other inappropriate business activities which will need to be considered before deciding whether the company should be a preferred tenderer.
Guidelines on Conflicts and Disclosure
In addition, the plan should provide for the establishment
of guidelines on conflicts
of interest issues and disclosure. It may be necessary, for example, to require tenderers to sign confidentiality or non-disclosure deeds before they can be given access to information. Similarly, undertakings may be required from tenderers that they have not had access to information concerning the tender, other than information officially provided in accordance with tender documentation or information that is otherwise publicly available. This may be an appropriate strategy where there is a risk that tenderers will seek to recruit Commonwealth officers involved in developing the Commonwealth's tender requirements or running the tender process so as to gain an unfair advantage in the preparation of their tenders. To avoid criticism from tenderers, the need for these undertakings should be made known to tenderers early in the process. In addition, personnel involved in the tender process should be made aware that they are required to disclose any potential conflicts of interest, such as proposed offers of employment from prospective tenderers.
Assessment and Negotiation
A key part of the plan will be to set out the appropriate framework for the assessment of tenders and, subsequently, the contract negotiation with the preferred tenderer or tenderers. The plan will need to provide for the oversight of compliance with the agreed tender evaluation methodology, review of the tender evaluation report, sign-offs in relation to compliance with the evaluation methodology, review of tender clarifications, and review of the application of the evaluation criteria (ie. to ensure a consistent application).
In relation to contract negotiation, the probity plan should provide for the identification of key issues for negotiation and the agency's preferred position on the issues. Procedures also should be established to govern the negotiations, including timeframes and the parties to be involved. There also should be a process for debriefing unsuccessful tenderers, and guidelines for how this debriefing should be undertaken.
Management or Employee Buyouts; In-House Bids
The possibility of a bid from a management or employee buyout team in the case of a privatisation, or a bid from an in-house team in a proposed outsourcing, can give rise to particular difficulties from a probity perspective, and strategies may need to be developed to manage these difficulties to maintain the integrity of the tender process.
For example, staff involved in preparing the buyout or in-house team bid should not be involved in developing the tender documentation or the evaluation of tenders. The general rule is that these staff should not have any, or any significant, involvement in the tender process: that is, an involvement that would give the buyout or in-house team an unfair advantage over other tenderers. If any involvement of these staff is required to assist with the tender, appropriate risk management measures will need to be implemented.
It is important to note that these measures are no guarantee that the process will not be the subject of criticism. However, effective implementation of the measures should minimise the scope for issue to be taken with the process. These measures might include confidentiality/non-disclosure deeds, physical separation of staff, restricting access to the bids of other tenderers, ensuring an open tender process, including full dissemination of information to all tenderers.
Role of AGS
AGS is happy to assist departments and agencies with their tender process, including preparing tender documentation, assisting with evaluation, and developing and implementing probity plans. AGS is also happy to undertake the role of probity adviser for clients.
1 Hughes Aircraft Systems International v Air Services Australia (1997) 146 ALR 1. For more information on the Hughes decision see Legal Briefing No. 33.
3 CPC 97/5 is available from the CTC website at http://www.ctc.gov.au/Publications/purchasing/cpc/cpcindex.htm
For further information please contact any of the following lawyers:
|Canberra||John Scala||(02) 6253 7223|
|Linda Richardson||(02) 6253 7207|
|Harry Dunstall||(02) 6253 7066|
|Sydney||Simon Konecny||(02) 9581 7585|
|Melbourne||Martin Bruckard||(03) 9242 1386|
|Brisbane||Robert Claybourn||(07) 3360 5767|
|Perth||Graeme Windsor||(08) 9268 1102|
|Adelaide||Sarah Court||(08) 8205 4231|
|Darwin||Rick Andruszko||(08) 8943 1400|
|Hobart||Peter Bowen||(03) 6220 5474|
ISSN 1448-4803 (Print)
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The material in this briefing is provided for general information only and should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material in this briefing.