Running a fair tender process: probity, clarifications, late bids and the rules you set yourself (Project Delivery, Procurement and Governance) | READOS

A tender is often treated as a way to get prices. Issue some drawings, invite three or four suppliers, compare the numbers and pick one. For small purchases that informality is usually fine. For significant work, a tender is much more than a price request. It is a process that sets rules, makes promises to the businesses invited to compete, and produces a decision that may later have to be explained to a board, an auditor, a funding body, an unsuccessful bidder or, occasionally, a court.

Bidders invest real money in responding. A detailed tender for a construction package, a supply contract or a technical service can cost a supplier thousands or tens of thousands of dollars in estimating, design and management time. They make that investment because they expect the process to be fair: that everyone receives the same information, that the stated rules are followed and that the decision reflects the criteria announced. When those expectations are broken, buyers lose more than goodwill. Good suppliers stop bidding, prices rise to cover the risk of an unfair process, and in some cases the buyer faces a legal claim.

This article explains, in general terms, how to run a tender process that is fair and defensible without becoming bureaucratic. It covers probity, the legal significance of the rules a buyer sets, handling questions and addenda, late and non-conforming tenders, conflicts of interest, evaluation and negotiation, and the record a buyer should keep. It is general information, not legal advice. Government buyers are subject to specific procurement rules, and any buyer facing a challenge to a tender process should take advice.

Probity is about fairness you can show

Probity in procurement means integrity, fairness and honesty in the process, demonstrated in a way others can verify. It is often treated as a compliance burden. It is better understood as a way of protecting the value of competition. A fair process attracts capable bidders, encourages sharp pricing and produces a decision that stands up to scrutiny.

Probity commonly rests on a handful of principles:

Fairness and impartiality. Every bidder is treated equally and judged on the same basis.
Consistency. The process follows the rules set out in the tender documents.
Transparency. Bidders know how the process will run and how they will be evaluated.
Confidentiality. Each bidder’s information, prices and ideas are protected.
Accountability. Decisions are made by people with the authority to make them, and the reasons are recorded.
Managing conflicts of interest. Anyone with a personal or business interest that could affect, or be seen to affect, their judgement is identified and managed.

For large or sensitive procurements, some organisations appoint an independent probity adviser. For most private businesses that would be excessive, but the principles still apply.

The rules you set may bind you

A buyer that issues a request for tender sets out how the process will run: what bidders must submit, by when, how tenders will be evaluated and how the buyer will choose. Many buyers assume these are statements of intention that they can depart from at will. That assumption can be risky.

Australian courts have recognised that, in some circumstances, a tender process can give rise to a process contract: a contract, separate from the eventual supply contract, under which the buyer promises to conduct the tender in the way it described. In Hughes Aircraft Systems International v Airservices Australia (1997), the Federal Court found that such a contract existed and that the buyer had breached it by not evaluating tenders as it had said it would. Whether a process contract arises depends on the tender documents and the circumstances, and many tender documents now state expressly that no process contract is intended. Courts may also imply obligations of fair dealing in the conduct of a process where a contract exists.

Two practical lessons follow. First, write only rules you are prepared to follow. Second, if you want flexibility, such as the right to change the process, negotiate with more than one bidder or accept a non-conforming tender, say so clearly in the documents through what are often called privilege clauses, and then exercise those rights fairly and consistently.

Design the process before you issue it

Most probity problems start with a poorly designed tender, not a dishonest one. Before issuing documents, settle:

The scope and specification. What exactly is being bought, and what must bidders price?
The contract. Which contract terms will apply, and are bidders permitted to propose departures?
The evaluation plan. Which criteria matter, how they are weighted, how they will be scored and how price will be compared. The choosing between quotes article explains how to set criteria and weights that reflect what matters.
The timetable. Enough time for bidders to respond properly, with dates for site visits, questions, closing and award.
The communication protocol. A single point of contact for all bidder communications, and a rule that other staff must refer approaches to that contact.
Who decides. The evaluation panel, the decision-maker and their authority.

Approving the evaluation plan before tenders arrive is one of the most important probity controls. Criteria and weights chosen after seeing the bids invite the suspicion, and often the reality, that the process was shaped to favour a preferred outcome.

Questions, clarifications and addenda

During the tender period, bidders will ask questions. How the buyer answers them is a frequent source of unfairness.

Route every question through the nominated contact. Informal conversations between bidders and project staff are a common way for one bidder to gain information others lack.
Share answers with everyone. If an answer could affect how any bidder prices or responds, issue it to all bidders, usually without identifying who asked. Keep a register of questions and answers.
Protect genuinely confidential questions. Some questions reveal a bidder’s innovation. Where an answer can be given without disclosing that information, do so, but do not use confidentiality as a reason to give one bidder an advantage.
Issue formal addenda for changes. If the scope, specification, contract terms or timetable change, issue a numbered addendum to all bidders and require them to acknowledge it.
Extend the deadline when changes are material. A significant change late in the period should usually come with more time.

Site visits and briefings

Site visits and tender briefings help bidders understand the work. They also create fairness risks. Run them for all bidders together where possible, or give each bidder the same access and information. Record what was said, and issue an addendum if any information provided at the briefing could affect pricing.

Late tenders

Tender documents usually set a closing date and time and state how late tenders will be treated. A common approach is that late tenders will not be considered unless the buyer is satisfied the lateness was caused by circumstances outside the bidder’s control, such as a failure of the buyer’s own submission system, and that accepting it would not give the bidder an unfair advantage, for example because no other tenders had been opened.

Whatever the rule, apply it consistently. Accepting one late tender and rejecting another, without a principled distinction, is one of the clearest ways to undermine a process. Record the time each tender is received and keep the evidence.

Conforming and non-conforming tenders

Bidders often submit tenders that depart from the documents: qualifications, exclusions, alternative designs or different contract terms. The tender documents should say how these will be handled. Options include:

requiring a conforming tender from every bidder, with alternatives allowed in addition;
allowing qualifications but stating how they will be assessed or priced in the evaluation; or
treating material non-conformity as grounds for exclusion.

Inviting alternative tenders can bring valuable innovation, but they must be evaluated fairly against the same objectives. Requiring a conforming tender alongside any alternative gives a common basis for comparison.

When a tender contains qualifications, the evaluation should not simply ignore them. A low price with significant exclusions may not be low at all once those exclusions are priced. Clarify qualifications with the bidder in writing, without allowing them to change their price or improve their offer in a way unavailable to others.

Conflicts of interest and confidentiality

Everyone involved in a significant tender, including evaluators, advisers and decision-makers, should declare any interest that could affect, or appear to affect, their impartiality: financial interests, family or personal relationships, prior employment with a bidder or offers of hospitality. Declaring an interest does not automatically disqualify someone. It allows the buyer to decide how to manage it, from monitoring to removal from the process.

Bidder information must be protected. Prices, methodologies and innovative ideas belong to the bidder. Sharing one bidder’s ideas with another, or using one bidder’s price to pressure another during the tender period, is a serious breach of fairness, and it destroys trust in future processes.

Evaluation that can be explained

The evaluation should follow the approved plan. Good practice includes:

Independent first scoring. Evaluators score each tender against each criterion independently before discussing.
Moderation. The panel meets to discuss differences and agree final scores, recording reasons for significant changes.
Separating price and quality. Some processes assess non-price criteria before the price is opened, sometimes called a two-envelope approach, to reduce the risk that price anchors judgement about quality.
Consistent clarifications. Questions to bidders about their tenders are in writing and do not allow a bidder to improve its offer.
An evaluation report. A clear document explains how each tender was assessed, the scores and reasons, any risks identified and the recommendation. The report should allow someone who was not present to understand why the recommended bidder was chosen.

The checking a preferred supplier before award article explains the due diligence that should follow evaluation and precede award.

Negotiating with the preferred tenderer

Many processes include negotiation with one or more preferred tenderers. Negotiation is legitimate if the documents allow it, but it must be handled carefully. Common risks include negotiating away the advantages that made the tenderer preferred, allowing changes in scope that would have changed the evaluation outcome, or using a competitor’s price as a bargaining tool. If negotiations change the deal materially, consider whether the evaluation still holds.

Award, notification and debriefing

When the decision is made, notify the successful bidder in the way the documents describe, and notify unsuccessful bidders promptly. Offering a debriefing, an explanation of how their tender was assessed and where it could improve, is good practice. It helps suppliers improve, maintains a healthy market and reduces the chance of a challenge based on misunderstanding. A debriefing should explain the bidder’s own tender, not disclose competitors’ confidential information.

The record

Keep a complete record of the process: the tender documents and addenda, the question register, records of site visits, the time of receipt of each tender, conflict declarations, individual and moderated scores, clarification correspondence, the evaluation report, approvals and notifications. If the process is ever questioned, this record is the buyer’s defence. It also makes the next tender faster to run.

Government buyers

Government agencies operate under specific procurement frameworks. Commonwealth entities, for example, are subject to the Commonwealth Procurement Rules, and each state and territory has its own policies and, in some cases, legislation. These frameworks impose obligations around value for money, competition, publication of opportunities and complaint handling. Businesses tendering for government work should read the applicable rules, because they shape how bids are assessed and what recourse bidders have.

A worked example

This is an illustrative example. The business, figures and events are hypothetical.

A manufacturer invites four contractors to tender for a $600,000 factory extension. During the tender period, the operations manager mentions to one contractor, at a trade event, that the owner is “flexible on the finish date”. Two weeks before closing, the engineer revises the floor-loading requirement, and a second contractor learns about it through a supplier.

When the tenders arrive, the contractor who spoke to the operations manager has priced a longer program and is cheapest. The second contractor has priced the revised floor, while the other two have not. The tenders are not comparable, and two bidders had information others lacked.

A sound process would have prevented both problems. All communications would have gone through one contact. The program flexibility would either not have existed or been issued to everyone as an addendum. The floor revision would have been issued as a numbered addendum, with acknowledgement required and, given its significance, a short extension. The manufacturer now faces a choice between re-tendering, which costs time, or seeking clarifications from all four bidders on a common basis: a fixed program and the revised floor. It chooses the second, issues identical written requests to all bidders with a short deadline and records why. The evaluation report explains the issue and how it was resolved.

How this applies to a small Australian business

Scale the process, keep the principles. A small tender does not need a probity adviser, but it does need one contact point, shared answers, a pre-approved evaluation plan and a record.
Write rules you will follow. If you need flexibility, reserve it clearly in the documents.
Control informal contact. Brief staff that bidder approaches go to the nominated contact.
Treat addenda seriously. Every change goes to every bidder, numbered and acknowledged.
Decide late-tender and non-conformity rules in advance. Then apply them consistently.
Protect bidders’ ideas and prices. Your reputation as a fair buyer is a commercial asset.
Debrief unsuccessful bidders. It improves future competition at little cost.

Common mistakes

Choosing criteria after seeing the bids. This is the most damaging probity failure.
Informal information leaks. Site conversations and supplier gossip can give one bidder an advantage.
Inconsistent treatment of late or non-conforming tenders. Accepting one and rejecting another without a principled reason.
Ignoring qualifications. A low price with heavy exclusions may not be low.
Auctioning prices. Using one bidder’s price to pressure another during the tender undermines trust and future competition.
No record. Without a record, even a fair decision is hard to defend.

Questions to ask

Have we approved the evaluation criteria, weights and method before issuing the tender?
Who is the single point of contact, and do all staff know it?
How will questions, answers and changes be shared with every bidder?
What are our rules for late, non-conforming and alternative tenders, and will we apply them consistently?
Have all evaluators and decision-makers declared any conflicts of interest?
Will our evaluation report explain the decision to someone who was not present?
Do our tender documents reserve the flexibility we need, and will we use it fairly?

Bringing it together

A tender is a process with rules, and fairness is what makes it work. Buyers that design the process before issuing it, approve the evaluation plan in advance, route communications through one contact, share every answer and change with every bidder, apply consistent rules to late and non-conforming tenders, manage conflicts and confidentiality, evaluate according to the plan and keep a complete record will run tenders that attract good suppliers and produce defensible decisions. The rules a buyer sets may bind it, so set rules you are prepared to follow and reserve flexibility openly rather than taking it quietly.

Source: KEVOS editorial notes. Examples and figures in this article are illustrations. This article provides general information and does not constitute legal advice.