Legal Briefing: Tender process not guaranteed to be pain-free
As anyone accustomed to tendering will know, it can be a time- consuming and costly exercise with no guarantee of reward.
In the vast majority of cases disappointed tenderers have no basis for recovering the costs they incur if their tender is ultimately unsuccessful.
However, as the recent Northern Ireland case of J&A Developments v Edina illustrates, this does not mean that parties inviting tenders can simply act as they please.
With Edina the contract was for the construction of a workshop and offices in Lisburn and the tendering procedure was to be in accordance with the Code of Procedure for Single Stage Selective Tendering 1996.
This provided that the contractor's tender price was not to be altered without justification.
Edina received six tenders of which J&A was the lowest. Edina then entered into negotiations with the three lowest bidders and invited all three to reduce their bids.
J&A refused but the second lowest bidder reduced its price by £25,000 and was awarded the contract.
J&A commenced proceedings against Edina for breach of contract and the court held that as the code was a term of the tendering contract there had been a breach of contract.
The court decided that had it not been for this breach J&A would have won the contract and therefore awarded J& A damages based on the loss of profit it would have made on the contract discounted by 20% to reflect the fact the loss of the contract meant J&A employees were available to do other work.
The court also awarded J &A the costs it had incurred in the preparation of its tender.
This case serves as a salutary reminder that those inviting tenders must take care to ensure the tendering process is conducted fairly and in accordance with codes or procedures.
It is also significant that this case concerned a tender competition in the private sector which is not regulated by statute in the same way tender competitions for public contracts have been for some time.
Michael McCord is a partner with Tughans Solicitors, which advises upon a range of specialist topics. For further information contact Michael by phone on 028 9055 3314 or by email at email@example.com.