Contracts Tenders - Process Contracts PDF

Contracts  Tenders – A Process Contract? Pratt Contractors Ltd v Palmerston North City Council 1 NZLR 469 (HC) The question to be asked in this case then is … did the parties intend to create contractual relations with respect to the submission of the tender, ie that p...

Contracts  Tenders – A Process Contract? Pratt Contractors Ltd v Palmerston North City Council 1 NZLR 469 (HC) The question to be asked in this case then is … did the parties intend to create contractual relations with respect to the submission of the tender, ie that part of the transaction… , as the "(a) contract"? There are in this case a number of considerations which lead me to the conclusion that the parties did so intend. First, this was not a situation where there was a mere calling for tenders and nothing more. The first advertisement requested contractors to register their interest for the construction of the project. In order to tender at all, interested contractors had to register their interest and pay a $100 non-refundable deposit before they received the tender documents for consideration. The actual submission of a tender was therefore contemplated as a second step and moreover, one which followed upon a declaration of interest backed by a non-refundable deposit. This is I think a significant point… Secondly, the tender documents were extensive, detailed and substantial. They set out not only the nature of the project contemplated, supported by detailed specifications and drawings, but also set out the conditions of contract which would apply if a construction contract were entered into… That indicates in detail the precise way in which the Council will evaluate tenders and indicates in mandatory terms, the basis on which a contract will be entered into. If that is to impose obligations upon the Council so that it is required to act in accordance with its indicated intention, then of course it may become binding in a number of ways. That is evidenced by the number of causes of action pleaded in this case, but in a commercial setting of the nature of the tendering process, by far the most convenient framework within which obligations may be said to arise and within which they can be considered, is a contractual one…  Tenders – A Process Contract? Onyx Group Ltd v Auckland City Council (2003) 11 TCLR 40 (HC) Onyx's case for breach of contract depends on the success of its argument that a process contract came into being at the time at which Onyx submitted its tender, in accordance with the terms of the RFT. There is now a considerable body of law in Commonwealth jurisdictions on the issue of process contracts in tender situations. I was referred to a number of decisions in which process contracts have been found to exist, including: England: Blackpool and Fylde Aero Club v Blackpool Borough Council 3 All ER 25. Canada: R v Ron Engineering and Construction (Eastern) Limited (1981) 119 DLR(3rd) 267; MJB Enterprises Limited v Defence Construction (1951) Limited (1990) 170 DLR(4th) 577, and R v Martel Building Limited 2 SCR 860. Australia: Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1; Cubic Transportation Systems Inc v New South Wales NSWSC 656. I was also referred to a number of New Zealand High Court decisions to the same effect, particularly Markholm Construction Co Ltd v Wellington City Council 2 NZLR 520, Pratt Contractors Ltd v Palmerston North City Council 1 NZLR 469 and Fullers Cruises Northland Ltd v Auckland Regional Council, (High Court Auckland, CP438/96, 4 June 1999 Paterson J). Those cases are all authority for the proposition that a request for tenders may lead to the creation of a process contract between the party requesting tenders and those submitting them, at the time that tenders are submitted.  Tenders – Reservation to Lowest Price Confirming Method Process South Waikato District Council v Roading and Asphalt Ltd NZCA 566 With respect to Keane J, we consider that the tender documents in this case were such as to differentiate them materially from those used by Palmerston North City Council. In our view, the following factors evidence the differences and allow us to distinguish Pratt: (a) In Pratt there was a specific clause stating that “The Principal shall only enter into a contract for the non-excluded tender with the lowest price”. In our view, that statement evidenced a clear expectation that the contract would not be let to anyone other than the lowest bidder. No such provision was contained in the present tender documents. In that circumstance, the tendering contractor was more likely to have focussed on the privilege clause than the contractor in Pratt. (b) The advertised invitation for tenders did not refer specifically to the “Lowest Price Conforming method” of tendering. It made it clear that the lowest, or any, tender would not necessarily be accepted. (c) While it is true that the tender documents expressly stated that tenders “will be evaluated according to the Lowest Price Conforming method”, that was not an unqualified statement. The documents identified Stage Two as requiring an evaluation of the “price attribute”, something that is not part of the usual model. (d) The Council made it clear that the “Schedule of Tenderer's Resources” would be “considered when evaluating the price attribute” and that the “lowest or any tender will not necessarily be accepted”. If Stage Two were to consist only of a comparison between the two prices offered, there would be no need for the Council to “consider” the Schedule of Tenderer's Resources, or to undertake an evaluative exercise. (e) The form of tender to be signed by the tenderer contained an acknowledgement that the Council was not bound to accept the lowest or any tender. (f) The nature and purpose of the “bonus” for diversion of approved materials was spelt out fully. There was an explicit reference to it in item 1.3 of the Schedule of Quantities, Rates and Prices. It was also identified in cl 1.6.4 of the tender document. RAL addressed the issue in its response to the tender. (g) In keeping with the need for “green waste” mulching the description of other scheduled items  Tenders – Good Faith and Fairness Pratt Contractors Ltd v Transit New Zealand UKPC 83; 2 NZLR 433 47. … In their Lordships' opinion, the duty of good faith and fair dealing as applied to that particular function required that the evaluation ought to express the views honestly held by the members of the TET. The duty to act fairly meant that all the tenderers had to be treated equally. One tenderer could not be given a higher mark than another if their attributes were the same. But Transit was not obliged to give tenderers the same mark if it honestly thought that their attributes were different. Nor did the duty of fairness mean that Transit were obliged to appoint people who came to the task without any views about the tenderers, whether favourable or adverse. It would have been impossible to have a TET competent to perform its function unless it consisted of people with enough experience to have already formed opinions about the merits and demerits of roading contractors. The obligation of good faith and fair dealing also did not mean that the TET had to act judicially. It did not have to accord Mr Pratt a hearing or enter into debate with him about the rights and wrongs of, for example, the Pipiriki contract. It would no doubt have been bad faith for a member of the TET to take steps to avoid receiving information because he strongly suspected that it might show that his opinion on some point was wrong. But that is all.  Tenders – Exclusion? Rintoul Group Ltd v Far North District Council NZHC 1132, NZAR 797 The first issue is whether the Council’s exclusion of Rintoul from the tender processes constituted a breach of contract. This turns on whether the process contracts provided for unilateral exclusion of an applicant prior to completion of the tender processes, and if so, whether Rintoul’s exclusion was justifiable according to the terms of those contracts. As observed earlier, separate analysis of each is not required because their terms do not materially differ.  Tenders – Preferential Treatment Far North District Council v Falcon Contracting Ltd (1996) 5 NZBLC 104,080 (HC) However, from FNDC's point of view, because of my findings, I make a declaration that FNDC is under no obligation to negotiate whether exclusively or otherwise on a preferential basis or at all with the defendant, in relation to the matter of a contract for the Russell Sewerage Reticulation Scheme, Stage II (balance of Russell Township & Long Beach, and Tapeka Point) or for separate Stage II & Ill contracts and FNDC is accordingly free to invite tenders and to let a contract or contracts therefor, to the tenderer (including Falcon if it tenders) which satisfies the tender criteria.  Tenders – Fair Trading Act 1986 Gregory v Rangitikei District Council 2 NZLR 208 (HC) More acute difficulties for council arise from remaining particulars; especially — given other circumstances — (f), the letter of 20 February 1992. The facts really speak for themselves. I refer to previous findings as to events from 9 December 1991 onward. Council had publicly resolved to sell by tender. It publicly called for, and received, tenders. It then decided not to sell by tender, but by private treaty, and preferably to Mr Roberts. It kept that latter intention — clearly formed as high as CEO level by 23 December 1991 — secret. I consider that secrecy in itself was deceptive. Having created a clear impression that council would sell, if at all, by tender, it was deceptive and misleading for council to proceed to sell by private treaty, without disclosure to tenderers. Council should have notified those concerned its intentions had changed.  Business Affected by the Public Interest Allnutt v Inglis (1810) 104 ER 206 The question on this record is whether the London Dock Company have a right to insist upon receiving wines into their warehouses for a hire and reward arbitrary and at their will and pleasure, or whether they were bound to receive them there for a reasonable reward only. There is no doubt, that the general principle is favored both in law and justice, that every man may fix what price he pleases upon his own property or the use of it : but if, for a particular purpose, the public have a right to resort to his premises and make use of them, and he have a monopoly in them for that purpose, if he will take the benefit of that monopoly, he must as an equivalent perform the duty attached to it on reasonable terms.  Prime Necessity Minister of Justice for the Dominion of Canada v City of Levis AC 505 (PC) The respondents are dealers in water on whom there has been conferred by statute a position of great and special advantage, and they may well be held in consequence to come under an obligation towards parties … there is an implied obligation on the respondents to give a water supply to the Government building provided that, and so long as, the Government of Canada is willing, in consideration of the supply, to make a fair and reasonable payment. The case stands outside of the express provisions of the statute, and the rights and obligations of the appellant are derived from the circumstances and from the relative positions of the parties.  Prime Necessity Mayor of Auckland v R GLR 415 (SC) State Advances Superintendent v Auckland City Corporation and the One Tree Hill Borough NZLR 1709 (CA) Wairoa Electric-Power Board v Wairoa Borough NZLR 211 (SC) South Taranaki Electric-Power Board v Patea Borough NZLR 954 (SC) Huntly Borough v South Auckland Education Board NZLR 282 (CA) Marlborough County Council v McFarlane CA48/84, 19 December 1984  Prime Necessity – Overlay of Commerce Act 1986 Vector Ltd v Transpower New Zealand Ltd 3 NZLR 646 For reasons we can express quite shortly we are satisfied that there is no room for the operation of the common law doctrine in relation to the transmission of bulk electricity by Transpower to Vector. It is precluded by the effect of the Commerce Act and that is reinforced by the effect of the State-Owned Enterprises Act. As noted earlier in para , the essential complaint in the pleadings is that Transpower has not adhered to its obligations under the s 26 economic statement and statements of corporate intent and that within those constraints (which Vector accepts would apply in relation to any common law obligation) there is some flexibility and margin of appreciation which in some respects yields prices which are unfair and unreasonable as between Transpower and Vector. We turn first to the Commerce Act. By that legislation Parliament clearly and deliberately moved away from earlier regulatory approaches to light-handed regulation. The selection of a particular form of regulation involves consideration by government and Parliament of fundamental issues of social and economic policy and obviously includes assessments of the tradeoffs between the costs associated with particular regulatory regimes and the benefits they are expected to deliver. If upheld in this case prime necessity would involve heavy-handed regulatory intervention on Transpower's pricing, through the Courts and potentially on a day to day basis at the suit of individual customers of Transpower, of a type which Parliament decided it did not wish to impose; and to do so would be inconsistent with the purpose and scheme of the Commerce Act.  Prime Necessity – Reasonable Lawful Alternative Stubbs v Taumarunui Borough 1 NZLR 125 (SC) While, therefore, a consequence of the defendant's failure to give the requisite notice under s 224(1) is that it cannot now enforce payment of the $90, I do not think that it follows that the first plaintiff can compel the defendant to connect his property to the sewerage scheme. The position may well be a stalemate with the plaintiff being unable to connect to the scheme unless he accepts the defendant's charge and the defendant being unable to compel payment of that charge. I am not asked to adjudicate upon the subsequent notices given by the defendant or to say whether the defendant is entitled to overcome the inadequacies of the first notice by compelling the first plaintiff to put in a second lateral to his property. That point was not argued, although it may well be that s 224(1) is limited to cases where there is no adequate connecting drain available for use, which can hardly be said to be true of the present circumstances. And it may be that if the defendant sought to recover the cost of constructing any further lateral sewer following upon the giving of the further notice under s 224, the action would fail because the defendant, by that means, would be seeking to make good its own initial default in complying with s 224. I prefer to leave this question open and I confine myself to the question in issue here, viz, whether a ratepayer can compel a council to link his property to a sewerage system on payment of no more than a nominal fee. I hold that he cannot do so. The first plaintiff's claim is, therefore, dismissed.  Frustration Petone Borough v Lower Hutt Borough NZLR 844 (SC) at 849 (gas supply contract not voided by World War) The Power Co Ltd v Gore District Council 1 NZLR 537 (CA) at 552 (agreement to supply power at fixed price in 1927 for all time hereafter not frustrated by effects of inflation and increased costs); Planet Kids Ltd v Auckland Council NZSC 147, 1 NZLR 149 (fire effect).