Local Government Contracts Series #1
Councils are large organisations and being public bodies, have detailed and systematic protocols for undertaking most activities. Entering into contracts is no exception. Council use public funds and have to follow probity principles in procuring goods and services. These principles are contained in a Council’s Procurement Policy (mandated under section 108 of the Local Government Act 2020) and unless an exception applies, generally require Council to engage in an open public process (eg tender, expressions of interest) before choosing an appropriate counterparty for any significant procurement.
The tender process can be long and drawn out, especially for larger projects. Councils put out a request for tender and potential suppliers submit tender responses. In the request for tender, Councils will usually include the specifications they require the successful tenderer to meet. After evaluating the responses received, Council selects a preferred supplier. Subject to any negotiation, the parties then enter into a contract for the relevant services, goods or works.
Specifications – watered down in a long process?
The specifications are likely one of the most critical parts of the contract for Council – they address what it requires (and after accepting a proposal, what Council can expect) from a performance perspective, from the other party. Although the specifications form part of the final contract, because of the time elapsed between formulating the specifications at the outset of the tender, and contract execution (signing and exchange), it’s possible that the specifications have been somewhat “diluted” in the contract. This may be the case even if the specifications themselves are unchanged.
This dilution can be because of negotiations with the counterparty, especially a more sophisticated one. The result of discussions and conferences with them might be that you’ve agreed to amend the contract in a way that limits your specifications – for example, by including a clause in the body of the contract which conflicts with the specifications and stipulating that the body of the contract prevails over any annexures (where the specifications reside). Or, limitations or exclusions may have been negotiated which materially water down the intended benefit of the specifications, even if they nominally remain intact.
This is especially likely to happen in a lengthy process where it is natural to focus on what is immediately in front of you rather than contemplating the big picture.
What can you do about it?
To ensure that you obtain the best outcome for your ratepayers, Councils should develop an internal process that ensures your procurement or legal team re-visits the objectives of the tender process before finalising the contract, with a particular focus on indirect impacts on the “value” of specifications. Refreshing on this can protect against Council unwittingly agreeing to limit the specifications in some way and ensure the purpose of the contract or the probity of the procurement are not lost amidst all the back and forth and legal paperwork.
At Hunt & Hunt, we can help review any changes suggested by your preferred supplier and also your internal process from time to time so that it remains robust and protects you appropriately. Please reach out to us to any of the three authors below.
