Ipex ITG Pty Ltd (in liq) (recs apptd) & Anor v State of Victoria [2012] VSCA 201

Ipex ITG Pty Ltd (in liq) (recs apptd) & Anor v State of Victoria [2012] VSCA 201 - VSCA 2012 case summary — Zoe

[30]

The services are required to be provided by 1st November 2002.

1. 2 Overview of the Selection Process

Parliament intends to manage the evaluation and selection process in two key stages:

1.2.1 Process Stages

Stage 1 - Compliance with Essential Criteria

Responses will be reviewed to assess compliance with essential selection criteria. Responses not satisfying these criteria will be eliminated from further evaluation. These essential criteria are:

(a table listed the essential criteria which related, inter alia, to the correct completion of schedules, the accreditation of the tenderer and prior experience)

Stage 2 - Compliance with Detailed Evaluation Criteria

Responses that comply with essential criteria will be subjected to detailed assessment via two separate process streams:

Evaluation Criteria - Complying responses will be evaluated and scored against the supplier and technical evaluation criteria to determine ranking on the basis of the solutions offered. Company presentations, discussions and visits to company premises may be utilised as part of the ranking process for the purpose of clarification and validation.

Comparison of Costs - an evaluation of costs will be carried out independently of the supplier and technical evaluations.

1.2.2 Evaluation Criteria

Each response to an RFT question will be related to a number of evaluation criteria and grouped and weighted according to the relative importance of the criteria. The major groupings to be used are as follows:

Supplier Evaluation

Soundness

Track Record

Contract, Strategic and Cultural Fit

Solution Evaluation

Parliament Requirements

Technical Requirements

Financial Responses (not costs)

Privacy and Legal

Project Management

1.2.3 Analysis of Costs

Solutions must be priced to take into account all charges and all costs to Parliament of Victoria for the proposed solution. Costings should clearly differentiate between 'one-off' project costs and annual expenditures.

Tendered price information will be kept separate from the assessment against the evaluation criteria until the final decision point.

Parliament of Victoria will favour Tenderers whose proposal contains a minimum of assumptions, constraints or caveats.

...

1.4 Acceptance Options

The Parliament of Victoria reserves the right to:

[32]

...

2.12 Compliance and Innovative Solutions

...

The RFT explicitly seeks Tenderers ideas on innovations and alternative solutions. All alternative options tendered should address the same issues and provide the same pricing information as for a conforming tender.

...

Tenderers should note that those Tenders, which in the Parliament of Victoria's assessment have insufficient or unclear information to comparatively evaluate the tender will be excluded from further consideration.

2.13 Inquiries Regarding the RFT

...

Verbal explanations or clarifications given to Tenderers prior to the acceptance of a Tender shall not be binding and shall only be used to provide a basis for a formal written enquiry that shall be responded to in writing by the Parliament. Any clarification issued will also be issued to all other Tenderers.

...

Canvassing by a Tenderer and/or his agents of any employee of the Parliament of Victoria or any Contractor or consultant currently employed by the Parliament of Victoria with respect to any matter pertaining to this RFT or the selection process shall be considered grounds for absolute rejection of that Tenderers proposal.

...

(The RFT referred to the 'existing business environment'including:)

3.2.4 Electorate Offices

Electorate Offices can be thought of as independent small businesses rather than extensions of Parliament. Each of the 128 physical offices (132 logical offices) located throughout Victoria has a small full/part time staff whom, together with the MP, service constituents using local electorate office facilities and resources provided by the Parliament. Members are highly mobile and require access anywhere /anytime to Parliament's resources.

Each electorate office is provided with a standard Kit of equipment consisting of desktop computers, printers, scanner and network devices. A detailed list of these products can be found in Schedule D.

...

4.4.2 Training

The delivery of appropriate training to all users and support personnel affected by the new SOE environment is a key factor in the success of the project.

Tenderers are to clearly outline their proposed approach to training and to provide the relevant cost information at Schedule A.

[41]

Once the claim with respect to inadequate weighting falls away, this aspect of the plaintiff's case comes down to whether, in failing to select the cheapest tender, the defendant failed to use value for money as the primary determinant in assessing tenders.

The plaintiff asserts that as it had submitted the cheapest 'compliant' tender the 'value for money' criteria required it be selected.

It is true that the Ipex tender was 'compliant' in that it met the essential criteria set out in the RFT (1.2.1), however that did not necessarily mean that it complied with Parliament's business requirements. The qualitative evaluation was designed to measure compliance with the RFT, that is, Parliament's expectations and business requirements.

An obligation to assess tenders on the basis of value for money does not compel the selection of the cheapest tender. The evaluation process sought to identify the tender response that offered the best solution at the best price. Just because the Ipex tender was the cheapest did not mean that it represented the best value for money. As Street confirmed in cross-examination, the nature of the RFT meant that the question of best value for money was a subjective business judgment.

The RFT was seeking a systems integrator to design and implement a new SOE. It expressly sought an innovative solution for what would be a complicated rollout in a number of locations throughout Victoria within a tight time frame. This was not simply a tender to supply a homogenous list of goods where price or costs would be the major differential between tenders. The focus was upon the system integration services to be provided. This is reflected in the Evaluation Report. Street explained, by reference to the table in the Evaluation Report, that the fact that the Ipex service cost was so low in comparison to all the other tenders immediately raised questions:

'The $540,000 immediately stands out that there's something wrong with it compared to the other five, because the purpose of the exercise is to compare them and make sure your comparing apples with apples, and the analysis of the team was that - in looking at the Ipex proposal, that the Ipex bid was putting forward fewer people to perform the job, and there were assumptions that Parliament would have to provide more staff than what they were planning to do when they put the project together. So it stands out. While it is the lowest cost, it stands out as an anomaly and was investigated in detail.'

In any event, it is relevant to note that Parliament had expressly reserved for itself the right not to accept the lowest quotation (RFT, 1.4). Given this express term, there is no basis for Ipex to contend that the lowest quotation gave it any entitlement to be selected.

The evidence demonstrates that in any event those assessing the tenders did not judge the Ipex tender as the best value for money. Their reasoning in this regard is set out in the Evaluation Report at pages 14 and 24. Street said that the comments in the bullet points on page 14 were based upon his numerous discussions with members of the PET. The reasoning is also exposed in the de-briefing notes prepared by Street which noted that the Ipex proposal did not appear to reflect an understanding of what Parliament was seeking in that it was proposing to not go much beyond a hardware and software upgrade. This misapprehension is also confirmed by the evidence of Ms Freund, who characterised the tender as 'largely a desktop tender' and that the focus was largely the supply of hardware.

Accordingly I agree with the defendant that this part of the plaintiff's claim must fail. The Parliament having determined that the Ipex tender did not represent the best value for money, so long as the evaluation criteria were applied as contractually required which I find they were, it is not for the Court to enter into an inquiry as to which tender did represent the best value for money.

It was suggested to Street in cross-examination that his 'value for money' analysis, which is graphically depicted in the Evaluation Report, materially misrepresented the relative value for money of the bids. He disagreed and pointed to the fact that the actual scores relevant to the x axis are set out in the Report. He said that the graph was intended to be a 'high level summary' of the findings, which was to be read together with the bullet points under the graph. Although the graph prepared by Ipex (Table 1) is a more accurate representation of the position so far as this case is concerned nothing turns on this point.

He denied the suggestion put to him in cross-examination that there was in fact only a small difference between all tenders when one looks at the per centum points allocated as a result of the qualitative assessment. Street explained that the per centum scores set out in the Evaluation Report were not in fact close and that they represented a wide margin of difference. I accept his evidence.

The submission by Ipex that value for money should have been determined simply by dividing the cost by the qualitative score (Table 2) is for the reasons given inappropriate and incorrect. As noted beside the graph on page 24 of the Evaluation Report the costs 'have not been equalised to take account of differences in proposals'. Indeed the cost differences reflected the different approaches, and the approach taken by Ipex was not adequate according to the PET using the criteria indicated.

Ipex submitted further that in conducting the value for money analysis the equipment component was disregarded in favour of a consideration of the service component. I do not agree. An overall assessment was made and this is apparent from the Evaluation Report and the evidence of Street.

[65]

44 Ipex said that the central question on the appeal was whether or not the method of evaluation identified in the RFT was followed by the respondent. We think, as did the trial judge, that this method of evaluation was in fact followed by the respondent. Ipex's primary contention, that the scoring against criteria identified under Stage 2 in the RFT was not done, has not been made out. Nor has Ipex made out its contention that no ranking was ever produced despite the mechanics of scoring having been undertaken. On the contrary, page 14 of the Evaluation Report[15] shows that, not only was the scoring undertaken but the weighted scores of the competing tenderers were compared and evaluated. We do not think that there is any substance in this aspect of Ipex's submission - it may be that all that Ipex was saying was that the weighted scores for some of the criteria set out in the RFT and in the Evaluation Plan were not set out in the table at page 14 of, or elsewhere in, the Evaluation Report but, as mentioned earlier,[16] the weighted scores for the criteria not listed were of no significance. Scores were omitted from the table for only two of the criteria, namely 'Financial responses (not costs)', and 'Privacy and Legal'. Those two criteria had in fact been considered by the PET. The PET had found no significant difference between the tenderers on those criteria. That is why the PET omitted the scores. Ipex says that the scores should still have been included. It submits that including the scores would have produced a narrower proportionate or percentage gap between the tenderers on their overall scores. That may or may not be correct. However, it matters not. The respondent was under no contractual obligation to give any specific weight to any of the listed criteria. In any event, of course, the ranking order of the tenderers (on the non-cost criteria) would have remained the same regardless. Nor were the proportionate or percentage differences between the overall scores in any way determinative. They could only have been determinative if Ipex were correct in a further submission which it makes, namely that the successful tenderer was required to be identified by a strictly arithmetical process of dividing each tenderer's score by its dollar bid so as to produce a 'value' figure per dollar. That further submission is unacceptable. It finds no support in the terms of the RFT. Indeed it is a fanciful submission. The trial judge rightly rejected it.[17]

[67]

46 The next contention by Ipex was that the costs of the bids had been taken into account as against the quality assessments prematurely, whereas cl 1.2.3 required that they only be compared at the 'final decision point'. Street[18], in his evidence, having been asked whether the price information was kept separate from the assessment against the evaluation criteria 'until the final decision point', answered that 'from a pure point of view, no.' In the same vein, Ipex complains that the creation of a 'shortlist' comprising Compaq and CSM was not authorised or allowed by the RFT because it contravened the obligation to bring the price information together with the quality assessment only at the final decision point. However, in our opinion, the construction placed by Ipex on the words 'final decision point' is artificial and incorrect. In our opinion, the expression 'final decision point' does not refer to a point of time, whether that be a minute or a day, immediately prior to the final selection of the successful tenderer. The expression is to be understood more generally as referring to the period during which the already assembled qualitative assessment and price comparisons were available to the PET and to the decision makers of the respondent for the purpose of selecting the successful tenderer. We do not think that, so understood, the respondent was in breach of cl 1.2.3. We note the finding of the trial judge, unchallenged on the appeal, that it was only after the tender evaluation worksheets were scored and weighted in accordance with the methods described in Part 2 of the Evaluation Plan that the resulting scores were brought together with an analysis of cost to arrive at a 'value for money' view of each tender in accordance with the process described in Part 3.1 of the Evaluation Plan.[19] We note also the trial judge's further unchallenged finding that the 'actual costs of the tender responses and the pricing submitted were analysed by Street and shared with the PET after the qualitative assessments had been completed and the comparative results incorporated into the Evaluation Report'.[20] Accordingly we see no reason to depart from the conclusion of the trial judge that 'the analysis of costs and pricing was undertaken separately from the evaluation undertaken by the PET', as envisaged in the RFT and the Evaluation Plan.[21]

[97]

5. The learned trial judge ought to have held that:

(a) Even if his Honour's finding that there was no breach of the express terms of the tender process contract was correct, it cannot and does not follow automatically that the other causes of action are not made out;

(b) For the misleading and deceptive conduct claim to be established, it is necessary to establish that the representation in the Request for Tender (RFT) concerning the evaluation of the tender was misleading and deceptive;

(c) Nothing his Honour found in [93] to [100] dealing with 'Failure to comply with the evaluation process set out in the RFT' would mean that it would follow that the representation cannot be misleading and deceptive under the Fair Trading Act.

(d) The matters set out in [93] to [100] dealing with 'Failure to comply with the evaluation process set out in the RFT' is irrelevant to whether the representation of the evaluation and evaluation criteria explicitly and expressly stated in the RFT was misleading or deceptive.

(e) If the representation concerning the evaluation and evaluation criteria expressly stated in the RFT was false and incorrect and would lead the First Appellant into error, then it is misleading and deceptive;

(f) The disclaimer clauses (referred to at [102]) cannot exclude a misleading and deceptive conduct claim.

(g) The representation relates to the evaluation and evaluation criteria and there is no express and explicit clauses that say that the Respondent can change the evaluation process and evaluation criteria without informing the First Appellant and the other tenderers;

(h) The misleading and deceptive conduct claim involves different factual and legal consideration from a breach of tender process contract claim;

(i) There is no evidence that the Respondent, in fact, changed any of the conditions of the tendering.

(j) In fact, the cross examination of Denis Street showed that he decided to remove the Solution Evaluation - Financial Response.

(k) There was no evidence that the Steering Committee approved this decision or that the RFT and Evaluation Plan authorised any changes to the evaluation criteria or evaluation process.

Failure to determine whether there were implied terms and the nature and contents of any such implied terms of the Tender Process Agreement

[147]

(i) not accept the lowest quotation, or any Tender, for all or part of the solution being proposed (clause 1.4);

(ii) negotiate with tenderers during the evaluation period (clause 1.5);

(iii) continue to contract at the negotiation stage with one or more selected tenderers (clause 1.4);

(iv) select an appropriate tenderer from tender proposals for specific services with whom further negotiations may be undertaken (clause 1.4);

(v) change any details of the RFT, including the conditions of tendering (clause 1.6).

42. The learned trial judge ought to have held that:

(a) the clauses referred to are known as disclaimer clauses' in the context of a tender process agreement;

(b) disclaimer clauses cannot be used to avoid a finding that there is a breach of the tender process contract by failing to evaluate the tender according to the express evaluation criteria;

(c) an attempt to rely upon such disclaimer clauses may be a breach of the implied term of good faith and fair dealing in and of itself;

(d) the disclaimer clauses do not provide a justification for breach of the express terms concerning the evaluation of the tender process;

(e) even if the disclaimer clauses could be used, none of the clauses provide that the Respondent can change the express terms dealing with the evaluation and scoring of the tender without informing the tenderers;

(f) disclaimer clauses are ineffective as a matter of contract law (and generally not effective for a misleading and deceptive conduct claim) unless they expressly and explicitly make it clear that they override an explicit and express term of the contract;

(g) Any construction of a disclaimer clause otherwise would lead to absurdity and the tender process contract would be meaningless;

(h) The disclaimer clauses in any event are not even applicable. They relate to 'negotiations' and 'conditions of tendering';

(i) what this claim relates to is the breach of the express and explicit terms dealing with the evaluation of the tender and the evaluation criteria and scoring and analysis of the costs, which goes to the heart of the fair tendering process for the best use of public money, not generalities of conditions of tendering or negotiations.

Therefore the learned trial judge ought to have found that the Respondent failed to comply with the Express Terms and failed to act fairly and reasonably and in good faith and comply with the criteria and approach referred to in the RFT and also engaged in misleading and deceptive conduct.

Exclusion of the Appellants' expert evidence

43. The learned trial judge erred (at [18] and [19]) in holding that:

(a) the expert statement of Roger Warr did not truly represent an area of expertise sufficient to make it expert evidence; and

(b) the many questions asked and answered by Roger Warr, were or could have been matters for the court to decide;

and thereby refused to permit the Appellants to adduce the expert evidence of Roger Warr, which was the only expert evidence sought to be adduced by the Appellants in respect of the evaluation of the tender.

At a glance

Court

Decision date

Before

Source

Judgment (168 paragraphs)

Parties

Legislation Cited (2)