Ipex ITG Pty Ltd (in liq) v State of Victoria
[2010] VSC 480
•29 October 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7182 of 2002
| IPEX ITG PTY LTD (ACN 007 433 623) (IN LIQUIDATION) | Plaintiff |
| v | |
| STATE OF VICTORIA | Defendant |
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JUDGE: | SIFRIS J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 16, 18, 19, 23, 24, 25, 26, 27, 30 August 2010 | |
DATE OF JUDGMENT: | 29 October 2010 | |
CASE MAY BE CITED AS: | IPEX ITG Pty Ltd (in liq) v State of Victoria | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 480 | |
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CONTRACT – Formation – Whether invitation to tender a mere invitation to treat or capable of constituting a tender process agreement – Whether obligation to act in good faith and fairly and reasonably and in accordance with the terms of the tender complied with.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R W McGarvie SC (until 24/8/10) with Mr A W Sandbach Mr D Clough (30/8/10) | AJH Lawyers Pty Ltd |
| For the Defendant | Mr J D Elliott SC with Ms G Schoff | Victorian Government Solicitor |
TABLE OF CONTENTS
Reasons for decision.......................................................................................................................... 1
A. Background........................................................................................................................... 1
B. The Tender Process............................................................................................................... 2
C. Tender Process Agreement................................................................................................... 3
Agreement or Invitation to Treat............................................................................................. 3
Terms of Tender Process Agreement..................................................................................... 10
D. Conduct of the defendant................................................................................................... 10
Reliance upon flawed evaluation criteria in the assessment of tenders..................................... 10
Failure to do a proper value for money analysis........................................................................ 13
Failure to inform Ipex of the evaluation criteria......................................................................... 15
Reliance upon “touch points” that were not communicated to Ipex........................................ 17
The cost of the solution in the tender was not a significant consideration to the defendant in assessing the tenders..................................................................................................................................... 18
The defendant wanted a “Rolls-Royce” solution in the tender............................................ 18
The defendant wanted a solution that replaced everything in the Parliament of Victoria IT environment and not a solution that added to the IT environment........................................................... 19
The defendant wanted existing equipment to be replaced and refreshed with all brand new equipment within Parliament of Victoria IT environment...................................................................... 19
Existing equipment within the Parliament of Victoria IT environment that was functional and working properly and that could be used to save costs was not to be used and instead the defendant wanted a total refresh.............................................................................................................................. 19
The defendant wanted domain controllers and dedicated servers in Parliamentary remote offices 19
The defendant wanted a solution that addressed the issues that were experienced by the Parliament of Victoria in relation to “anywhere/anytime access” that was not specified in the (Request For Tender)................................................................................................................................................... 20
That the “anywhere/anytime access” that Parliament wanted was access anywhere in the world via the internet..................................................................................................................................... 20
Failure to comply with the evaluation process set out in the RFT............................................. 21
Conclusions as to conduct............................................................................................................ 22
E. Vendor de-briefing.............................................................................................................. 23
F. Conclusion and Orders....................................................................................................... 27
HIS HONOUR:
Reasons for decision
A. Background
In 2002 the Parliament of Victoria (“Parliament”) embarked upon the Parlynet 2002 project. The object was to implement a new desktop standard operating environment (“SOE”) for the Parliament based on the Microsoft 2000/XP and Lotus Notes 5.0 technology and to replace workstations, servers, printers and scanner equipment at each of the 132 electorate offices (“the Project”).
On 20 May 2002 Parliament issued a written “Request for Tender for System Integration Services” (“RFT”). The nature and scope of the Project is set out with adequate specificity in the RFT and in particular in Section 1.1. The Plaintiff, (“Ipex”) was one of a number of tenderers who submitted a tender in response thereto.
On 16 July 2002, Ipex was told that its tender had been unsuccessful and Ipex was invited to attend a “detailed de-brief”.
On 8 August 2002 representatives of Ipex attended a “de-brief” conducted by Graeme Spurr (Spurr), the Project Sponsor and Denis Street (Street) of KPMG Consulting.
On 9 September 2002 Ipex instituted this proceeding against the State of Victoria.
At the time the proceeding was commenced the shareholding in Ipex was controlled by Takapana Investments Pty Ltd (“Takapana”), a trustee of a discretionary trust.
On 24 November 2008, Ipex was placed in liquidation.
By proceeding No. 5802 of 2009, Takapana sought leave pursuant to the inherent jurisdiction of the Court and s 477(6) of the Corporations Act2001, to continue the proceeding, nunc pro tunc, in the name of Ipex.
On 28 July 2009 and on the basis of certain undertakings Efthim AsJ made the order sought by Takapana.
Ipex sues the State of Victoria as the representative in suit of the Parliament pursuant to Part II of the Crown Proceedings Act1958 (Vic).
The management of the Project comprised a Steering Committee, Project Sponsor, Project Manager, Technical Working Group, and User Group. This structure is detailed at page 4 of an Evaluation Report dated 1 July 2002.
The Steering Committee, known as the Parlynet 2002 Project Steering Committee, was responsible for the overall guidance of the project and approval of major milestones. The members of the Project Steering Committee were the two Presiding Officers, being the Speaker of the Legislative Assembly and the President of the Legislative Council, other Members of Parliament and Departmental Heads and Spurr who, as the Director of Infrastructure Services for the Parliament, was the Project Sponsor.
KPMG Consulting was engaged by the Parliament to manage the RFT process by which it sought to engage the system integrator to design, build and implement the new SOE. Street of KPMG managed the RFT aspects of the Project.
B. The Tender process
The RFT document contained much information. It provided an overview of the selection process and evaluation criteria. Terms and conditions were set out. Parliament’s existing IT environment was set out together with Parliament’s requirements. It is clear that the requirements went beyond the supply of hardware and called for an innovative approach.
Street prepared a Tender Evaluation Plan at the same time as the RFT. The plan set out in some detail the principles to be followed. The plan was not made available to tenderers.
Recipients of the RFT were invited to attend a briefing session on 23 May 2002. Representatives of Ipex attended. Street gave a PowerPoint presentation, clarified a number of matters and answered questions. The PowerPoint presentation and a revised transcript together with a list of clarification questions and answers were emailed to attendees including Ipex.
Prior to the closing of the tenders various questions (69 in total) were asked by tenderers. Each question and answer was circulated to all tenderers including Ipex.
After the close of tenders the evaluation and selection process took place. According to Street the Tender Evaluation Plan was followed as was the procedure referred to in the RFT. His evidence was to the effect that a qualitative functional evaluation took place followed by a cost evaluation. Thereafter a value for money analysis took place resulting in a short list of two and finally a selection of the successful tenderer. It was CSM Limited (“CSM”). Ipex was aggrieved and commenced this proceeding.
Before commencing this proceeding Ipex requested a meeting to discuss its unsuccessful tender proposal. The meeting was held on Thursday, 8th August 2002 at 2 pm. It was attended by Street and Spurr on behalf of the Parliament, and three representatives of Ipex (Davitidis, Craig Miles (Miles) and Mark Knightley (Knightley)). It is alleged by Ipex that various admissions were made during the meeting.
C. Tender Process Agreement
Agreement or Invitation to Treat
Ipex alleges that, as a consequence of it having submitted a “conforming” tender in accordance with the conditions stipulated in clause 2.11 of the RFT, Ipex and the State of Victoria entered into an agreement (defined as the “Tender Process Agreement”) which comprised the terms set out in the RFT together with further terms which are to be implied (pars. 6A, 7, 8 and 10 of the Second Further Amended Statement of Claim (SFASC)). Additional terms relevant to the “tender evaluation process” are pleaded in par 49 of the SFASC. An agreement of the kind alleged by Ipex is also called a process agreement or pre-award agreement.
Accordingly, the first issue to be determined is whether the submission by Ipex of a tender in response to the RFT gave rise to a “process agreement” of the kind found by Finn J in Hughes Aircraft Systems International v Airservice Australia[1].
[1](1997) 76 FCR 151 at 183-4.
Did the parties intend to bind themselves contractually to comply with the proposed tender process? Ipex contends that it did. The defendant contends that it did not. It contends that the parties were treating with each other in a process of negotiation with no binding contractual obligations. Each party points to factors that they contend supports their case.
In the final analysis the answer must depend on the intention of the parties as disclosed by the tender documents. These are the key documents passing between the parties pre-award.
Tenderers may be in the unfortunate position where the intention of the parties – judged objectively by the tender documents – is not to bind themselves contractually to the process, despite the tenderer having spent substantial time and money and having a legitimate expectation in relation to the process. Whether and to what extent the pre-award period should be subject to legal obligations to give effect to the legitimate expectations of the parties is an interesting and relatively novel area.[2] However, I must deal with the matter in accordance with the pleaded case and the current law.
[2]See generally Government Contracts – Federal, State and Local, Seddon (2009 Federation Press) at 319-342.
In Hughes, Finn J agreed with the proposition stated in Pratt Contractors Ltd v Palmerston North City Council[3] that a simple, uncomplicated, request for bids will generally be no more than an invitation to treat, not giving rise to contractual obligations, although it may give rise to obligations to act fairly. Whilst his Honour found that in the distinctive facts of the case before him the respondent intended to bind itself to comply with the tender evaluation procedures proposed[4], he eschewed any finding that tender procedures ought generally to be protected under the law of contract.[5]
[3][1995] 1 NZLR 469 at 478-9.
[4]Those facts are set out in the judgment extensively, but see especially at 183-5.
[5]Hughes (supra) at 185-186.
In Hughes the Civil Aviation Authority (CAA) called for tenders for the installation of a new national air traffic control system. The first round of tendering was disastrous. It was aborted and an official inquiry took place. The tender process was re-started after recommendations were made to rectify serious faults in the tender process.
The request for tender in Hughes listed four criteria in order of importance. It specifically stated that the successful tenderer would be selected on the basis of these criteria.
The contract was awarded to Thomson. Hughes complained. Finn J found a number of flaws in the tender process. Finn J held there was a preliminary “process” contract governing the tender process and that there had been breaches of this contract.
Given the history of the tender process it was necessary according to Finn J to give the process some force in order “to protect the integrity of the bidding system”.
In Pratt, a case decided before Hughes, Gallen J held that in relation to a tender, a process type contract did come into existence. Gallen J identified the traditional position – namely that the calling for tenders was “no more than an invitation to treat and did not give rise to any legal relationship” – and after reference to authority in various jurisdictions concluded that in appropriate cases the relationship between the parties pre-award may be formulated in terms of offer and acceptance and consequently may be contractual in nature depending on the intention of the parties.
The factors that Gallen J found significant were the following:
(a)Payment of a non-refundable deposit of $100 before receiving the tender documents. It was also necessary for contractors to register their interest before receiving the tender documents.
(b)The tender documents “were extensive detailed and substantial”. They set out not only the nature of the project but also the conditions of contract and evaluation criteria. The request for tender also provided that a stated evaluation method would be used to select the successful tenderer.[6]
[6]Tenders were to be assessed by reference to various attributes and grades. Gallen J held that those circumstances indicated that council was assuming obligations within a contractual framework.
In finding that there was a process type contract Gallen J relied on a decision of Bingham LJ in Blackpool Borough Council.[7] It is apparent that Bingham LJ was confining himself to the case under consideration. It is relevant to note that his Lordship specifically stated that contracts are not lightly to be implied and that “the court must be able to conclude with confidence both that the parties intended to create contractual relations and that the agreement was to the effect contended for”. After an examination of what the parties said and did his Lordship concluded that there was a clear intention to create a contractual obligation to consider the tender. Part of the reasoning was that the tender conditions set out detailed instructions relating to the submission of tenders.
[7]Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195.
In Transit New Zealand v Pratt Contractors Ltd[8], Transit New Zealand (“Transit”) sought tenders for a large contract. The request for tender document was comprehensive. It required tenders to be submitted in two sealed envelopes. One was to contain the tender price and the other the proposal without disclosing the price. The document set out a detailed method of evaluation. The method involved a very structured form of assessment incorporating a qualitative evaluation and price competition.
[8][2002] 2 NZLR 313.
The Court of Appeal (Keith, Blanchard and McGrath JJ) held that the request for tenders gave rise to a process contract. The Court of Appeal said this:
“[77]Whether a request for tenders gives rise to a process contract, once a conforming tender is submitted, is in all cases a question of whether all the elements of contractual formation are made out at that point. Analysis of the terms of the invitation to tender is the starting point. Where the request makes no express commitment concerning the manner in which tenders received will be addressed, that may indicate the invitation was no more than an offer to receive them. On the other hand, as Blackpool and Fylde Aero Club indicates, the rigorous and comprehensive expression of requirements to be complied with by tenderers may give rise to an implied promise by the invitor to consider a conforming tender if others are considered. The law does not, however, have a policy which inclines towards enforcement of implied promises by invitors, even if they are public bodies, and whether there has been a binding promise as to process is to be ascertained by applying general principles of contract law concerning contract creation and implied terms.
[78]The present case is an instance in which the terms of the successive requests for tender, and the documents they incorporated, expressed in mandatory terms a commitment to abide by a certain process which included criteria for tender evaluation. Transit plainly undertook to apply a particular approach to evaluation of tenders received, and not to accept a tender other than that obtaining the highest index under that approach. This aspect of the request for tenders further indicates that Transit, and those submitting tenders, would have understood Transit to be binding itself to follow the specified process – a strong indication of the contractual element of mutual intention to create legal relations. The fact that the request also reserved the right for Transit to reject all tenders does not displace that indication.”
The Court of Appeal also found relevant the fact that the request for tender document specified each attribute to be evaluated and the weighting it would carry in the evaluation.
Transit was followed by Adams J in Cubic Transportation Systems Inc v New South Wales[9].
[9][2002] NSWSC 656 (Cubic).
The case also involved a government tender. The New South Wales Government and others sought to develop an Integrated Ticketing System for the Sydney metropolitan public transport system. Various calls for proposals were made, proponents were short listed and ultimately a final detailed Call for Revised Offers (the Call) was distributed. Ultimately Cubic was unsuccessful and commenced proceedings alleging that the tender process miscarried.
The Call included background matters, the project descriptions, instructions and set out the evaluation process in general terms.
After referring to Transit in some detail Adams J said as follows:
“[44]In the end, though not without misgivings, I consider that the language of contract in clauses 3.1.1 and 3.1.17 of the Call is such that the conclusion that a contract of some kind was intended is correct.”
Counsel for Ipex referred me to Dockpride Pty Ltd & Anor v Subiaco Redevelopment Authority[10] The case involved a tender for the purchase of land. The plaintiff was the unsuccessful tenderer and alleged that the defendant was contractually bound to conduct the tender process fairly and in accordance with defined criteria.
[10][2005] WASC 211 (“Dockpride”).
In relation to whether there was a process contract Le Miere J said:
“128Each of the tenderers had expended substantial time and resources in preparing and submitting its tender. To conclude that Dockpride and the Authority had no intention to enter into contractual relations does not recognise the commercial realities of the Station Square tender process. Such an approach does not accord with the legitimate expectations of the Authority and Dockpride. As Bingham LJ said in Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 at 1201 there would be ‘an unacceptable discrepancy between the law of contract and the confident expectations of commercial parties’ if that approach were adopted.”
A review of the authorities suggests that courts are more willing to find process contracts as governing the relationship of the parties pre-award in cases where a timeline and detailed process, including evaluation criteria, are set out in such a way that suggests that an obligation (promissory in nature) to follow such timeline and process has been incurred.
Having reviewed the relevant cases it is abundantly clear that each case must be considered on its own facts. Each request for tender (or related and associated documents) and the relevant context and circumstances must be examined separately in order to determine whether there is any intention to create an immediately binding contract as to process.
Although not free from difficulty, in my opinion the RFT was intended to be a legally binding contract as to process. It was not simply a document that provided relevant information. Rather the RFT included in some detail the specific criteria that would form the basis of the evaluation. These were matters considered to be of importance in the cases referred to. An examination of the whole of the RFT must be considered in determining the presumed intention of the parties from the language they have used. I conclude after such examination that the presumed intention of the parties was to enter into a legally binding process contract.
In my opinion clause 1.2 is decisive. It contains detailed evaluation criteria that Parliament said “will” or “must” be applied. This clause and others suggests a commitment, promissory in nature, to abide by a process particularly in relation to the evaluation of tenders.
In my opinion the clauses referred to by the defendant – which confer a wide discretion on the defendant in relation to various matters associated with the tender - do not detract from this conclusion although may be of some assistance to the defendant in other respects, particularly in relation to performance under the Tender Process Agreement.
Accordingly, the parties are bound by the Tender Process Agreement.
Terms of Tender Process Agreement
The critical terms alleged by Ipex are that the defendant was obliged to act fairly and reasonably and in good faith and of course comply with the criteria and approach referred to in the RFT as promised. The defendant has conceded that it was obliged to act fairly, reasonably and in good faith but has submitted that such obligations do not arise ex contractu.
Accordingly, the next question is to determine whether Parliament did act fairly and reasonably and in good faith and complied with the criteria and approach referred to in the RFT. This requires a detailed analysis of the conduct of Parliament and is dealt with in the next section. If Parliament did so comply that is the end of the matter and it will not be necessary to determine the legal basis of the agreed obligations. If Parliament did not it may be necessary to decide whether such terms as pleaded do in fact arise ex contractu. Clearly the obligation pre-award to comply with the criteria and approach referred to in the RFT was a term of the Tender Process Agreement.
D. Conduct of the defendant
The conduct alleged by Ipex as constituting a breach of Tender Process Agreement also forms the basis of its additional and alternative causes of action. The conduct is set out and dealt with hereunder.
The essence of Ipex’s complaints, despite a lengthy, rather discursive and at times difficult to follow pleading, is that the defendant engaged in conduct that departed in a number of respects from the RFT. In other words, the defendant was obliged to comply with the terms, mechanisms and procedures contained in the RFT.
Accordingly if the defendant acted in accordance with the RFT the claims must fail.
Reliance upon flawed evaluation criteria in the assessment of tenders
Ipex complains that the defendant relied upon, as the basis for evaluation of the tenders, flawed evaluation criteria, which attached insufficient importance and weight to the financial aspects of the respective tenders. Ipex points in particular to the fact that only 10 of the total 100 scoring points were allocated (page 8 of the Parlynet 2002 Project Evaluation Report) to the financial aspects of the tender.
The evaluation criteria adopted in evaluating each of the Tenders is set out in section 1.2 of the RFT and in a document entitled ‘Parliament of Victoria, Parlynet 2002 Project Evaluation Plan’, …, and in particular the process described in part 1.4.2.2 therein and the criteria set out in the Tender Evaluation Worksheets comprising Part 4 of the Evaluation Plan.
The criteria set out in the Tender Evaluation Worksheets comprising Part 4 of the Evaluation Plan were scored and weighted in accordance with the methods described in Part 2 of the Evaluation Plan.
The ‘financial aspects’ of the individual tender proposals were scored in accordance with the tender Evaluation Worksheet entitled “4.6 Solution Evaluation-Financial”. The weighting of 10 out of 100 scoring points allocated to the financial aspects of the tenders was appropriate and applied only to the qualitative aspects of the evaluation set out therein and not to the actual cost of the individual tender proposals.
The resulting scores were then 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.
It was clear to the tenderers from reading the RFT that the “financial” criteria that were the subject of evaluation and weighting did not include the actual costs of the tenders (RFT, section 1.2 which, in setting out the criteria, refers to financial (not costs). The Ipex Bid Management Plan reproduced this.
Further, the tender evaluation worksheet entitled “4.6 Solution Evaluation-Financial”, demonstrates that the financial criteria by which the tender responses were to be evaluated did not relate to the actual cost or pricing of the respective tenders. The five criterion identified are:
(i)has the vendor provided a complete picture of the expected costs (no hidden costs) and ongoing transparency?;
(ii)is there evidence of standard practice and process for pricing additional services?;
(iii)has the vendor provided adequate assumptions to back up its commercial offerings?;
(iv)has the vendor proposed a pricing approach that is suitable to Parliament?;
(v)will the vendor accept a penalty/bonus system?
As pointed out by the defendant, none of those criteria involved any evaluation at all of cost or the price of the services offered by the respective tenderers.
After the criteria set out in the tender evaluation worksheets comprising part 4 of the Evaluation Plan were scored and weighted in accordance with the methods described in part 2 of the Evaluation Plan, the resulting scores were then and only then 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. Accordingly, the analysis of costs and pricing was undertaken separately from the evaluation undertaken by the PET. I accept the unchallenged evidence of Street in this regard. I find that the evaluation procedure and weighting complied with the RFT and the Evaluation Plan. There was no flawed evaluation criteria as alleged.
The erroneous claim that the defendant afforded a weighting of only 10 to the costs of the project is relied upon by Ipex as supporting its further allegation that the defendant failed to use value for money as the primary determinant in assessing tenders.
Failure to do a proper value for money analysis
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.”[11]
[11]Evidence of Denis Street, Ipex ITG Pty Ltd v State of Victoria trial, pp 495-496, 26 August 2010.
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.
Failure to inform Ipex of the evaluation criteria
Ipex alleges further that the defendant failed to inform Ipex:
(i)that it intended to adopt or had adopted the evaluation criteria;
(ii)that the evaluation criteria gave a weight of only 10 per cent to the financial aspects of the tender;
(iii)of the terms and weighting of the evaluation criteria; and
(iv)that the evaluation criteria would be used to shortlist tenderers.
Whilst the criteria by which tenderers would be evaluated were set out in section 1 of the RFT document, the weighting accorded to each was not made known to the tenderers. This was quite deliberate as to do so can lead to responses being unduly biased towards these weightings.
In any event, there was no obligation to inform the tenderers of the actual weightings to be applied to the criteria identified in the RFT. Ipex asserts that the RFT document would have led tenderers to assume that cost was the most important criteria and that accordingly, to give it a weighting of only 10 was a breach of the agreement. As discussed above, the assertion that the cost of tenders was given a weighting of only 10 misapprehends the facts.
With respect to the allegation that the defendant failed to inform tenderers that the evaluation would be used to short list tenderers, the RFT expressly reserved the right to continue to contract negotiation stage with one or more selected tenderers (clause 1.4).
Although much was made in cross-examination of the fact that the RFT did not expressly refer to shortlisting, Street acknowledged that by shortlisting CSM and Compaq the Evaluation Team had varied the process but that the RFT allowed for that variation and that the process was still fair. In any event, Street said that shortlisting is common practice in tender evaluation, whether or not it is referred to in the RFT. Here the express terms of the RFT contemplate that Parliament will have the flexibility to proceed to negotiate with one or more selected tenderers. Ipex’s submission that because its qualitative assessment was only 6 points behind CSM it should have been included in further analysis is without merit. Accordingly I am of the opinion that in acting as it did, the defendant did not breach the Tender Process Agreement. In fact the contrary is the position. It acted pursuant to the contract.
Reliance upon “touch points” that were not communicated to Ipex
Ipex alleges further that the defendant relied upon matters which would particularly influence a decision on the assessment of tenders (defined as “touch points”), which were not incorporated into the RFT and were not communicated to Ipex. These allegations also form the basis of allegations that the Defendant failed to adequately inform tenderers of the scope or requirements of the RFT.
The “touch points” are identified in the particulars under paragraph 11 of the SFASC as follows:
(i)The cost of the solution in the tender were not a significant consideration to the defendant in assessing the tenders;
(ii)The defendant wanted a “Rolls Royce” solution in the tender;
(iii)The defendant wanted a solution that replaced everything in the Parliament of Victoria IT environment and not a solution that added to the IT environment;
(iv)The defendant wanted existing equipment to be replaced and refreshed with all brand new equipment within Parliament of Victoria IT environment;
(v)Existing equipment within Parliament of Victoria IT environment that was functional and working properly and that could be used to save costs, was not to be used and instead the defendant wanted a total refresh;
(vi)The defendant wanted domain controllers and dedicated servers in Parliamentary remote locations;
(vii)The defendant wanted a solution that addressed issues that were experienced by the Parliament of Victoria in relation to ‘anywhere anytime access’ that was not specified in the RFT;
(viii)The ‘anywhere/anytime’ access that Parliament wanted was access anywhere in the world via the Internet.
The cost of the solution in the tender was not a significant consideration to the defendant in assessing the tenders
The plaintiff’s claim in this regard proceeds upon a misapprehension of the facts. As discussed above, “cost” was not given a weighting of only 10. It is not weighted at all in the qualitative assessment. However, it is clear from the RFT that the cost of the solution was a significant consideration and was essential in assessing the relative value for money of each tender, but not to the exclusion of the quality of the tender which required a good understanding of what the defendant was seeking in relation to the Project.
The defendant wanted a “Rolls-Royce” solution in the tender
Parliament was looking for a fresh approach to a re-design of its infrastructure and this is best reflected in the comments made during the Industry Briefing on 23 May 2002:
“Parliament is not looking for an extension of the existing environment. This project is an opportunity for the Parliament to step back and take a fresh look. This is an opportunity with a blank sheet of paper, so design what you think would be an optimum environment to meet the necessary user requirements listed in the RFT. However, don’t go mad with that because the budget is not limitless. The main point is, as I said before, Parliament is not looking for an extension of what it has got; it is prepared to take a whole fresh look at it.”
This is not consistent with an assertion that Parliament wanted a “Rolls Royce” solution. Further, the RFT made it sufficiently clear what was required. There is no evidence to suggest that a “Rolls Royce” solution was required.
The defendant wanted a solution that replaced everything in the Parliament of Victoria IT environment and not a solution that added to the IT environment
By clause 1.1 of the RFT, the Parliament made it clear that it sought the replacement of workstations, servers, printers and scanner equipment at metropolitan and country locations. The replacement of equipment in the central Parliamentary precinct was to be addressed at a later date in the context of the newly designed IT infrastructure, i.e., if the specifications of the existing equipment were adequate then that equipment would be retained, otherwise it would be replaced (see RFT Schedule B section 1.4). Further, it was clear from the RFT document that the selected systems integrator was required to “design, build and implement a new desktop” SOE (see clause 1.1) and that the RFT was focused on providing a ‘replacement infrastructure’ (see clause 3.5). Further, Schedule B which contained a statement of work to be done set out at clause 1.4 the tasks to be carried out by the systems integrator, which included the development of the new desktop specification including server and Lotus Notes infrastructure and support facilities and the replacement of workstations, servers, printers and other shared equipment in electorate offices and hardware in other areas of Parliament. Further, at the Project Industry Briefing and by way of clarification questions and answers (see above) tenderers were informed that Parliament was not looking for an extension of the existing environment but for a “fresh look”.
The defendant wanted existing equipment to be replaced and refreshed with all brand new equipment within Parliament of Victoria IT environment
This aspect has been dealt with above.
Existing equipment within the Parliament of Victoria IT environment that was functional and working properly and that could be used to save costs was not to be used and instead the defendant wanted a total refresh
This aspect has been dealt with above.
The defendant wanted domain controllers and dedicated servers in Parliamentary remote offices
The RFT does not state a requirement for domain controllers or dedicated servers in Parliamentary remote offices. This technology structure was a feature of some of the tender proposals received and they were evaluated accordingly.
The defendant wanted a solution that addressed the issues that were experienced by the Parliament of Victoria in relation to “anywhere/anytime access” that was not specified in the RFT.
That the Parliament sought a solution that addressed the requirement that Parliamentarians have “anywhere/anytime access” was specified in clause 3.2.4 of the RFT document and clauses 1.2.1 and 1.2.2 of Schedule B to the RFT. This requirement was also referred to in clarification questions and answers, which Mr Miles acknowledged he would have received.
On 14 June 2002, Ipex was specifically asked to clarify how its proposed solution would satisfy Parliament’s requirement for anywhere/anytime access for individual members of Parliament (see the clarification questions for Parlynet 2002 RFT responses – 14 June 2002 document which was provided to Ipex during the course of the working level discussion held with it on 17 June 2002). The Ipex response did not adequately address this question.
That the “anywhere/anytime access” that Parliament wanted was access anywhere in the world via the internet
In addition to the matters above, clause 1.2.2 of Schedule B contained the following statement: “All users will be able to access their network resources from an Electorate Office, anywhere within Parliament House and ‘on the road’, both nationally and internationally where appropriate. User data and departmental servers to be able to be accessed globally across the network”.
Accordingly, the RFT properly defined the scope of the Project. The RFT documentation made it clear that Parliament was looking for innovative solutions. This was not a case in which the Parliament had already determined exactly what services it required and how they were to be delivered. This was not a case in which it was possible to set out with precision the equipment and services that Parliament required with a view to identifying the lowest cost tender.
It is apparent from the evidence that all tenderers were treated equally and in accordance with the terms and condition set out in the RFT document. In any event, there is no allegation in the SFASC that Ipex was treated differently or on an unequal basis to any other tenderer. The initial claims to that effect were struck out.
Failure to comply with the evaluation process set out in the RFT
Ipex complains about the scoring process. In particular, Ipex complains that the PET failed to score specific aspects of the tenders by reference to the evaluation criteria identified in the scoring sheets as ‘Financial’ and ‘Privacy and Legal’.
Ipex alleges that the core team of panel members was responsible for the evaluation of the costs of the tenders received in response to the RFT and that Hilton Barr was also responsible for the evaluation of the costs of the tenders in response to the RFT.
For the reasons set out above that allegation is not made out. 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. Hilton Barr was part of the PET and reviewed the Soundness, Track Record and Financial criteria of the tender responses.
Ipex alleges further that the defendant did not conduct an evaluation, whether by PET or otherwise, of the tender responses in accordance with the evaluation criterion identified in the Solution Evaluation/Financial “has the vendor proposed a pricing approach that is suitable to Parliament”. Whilst none of the tender responses were scored by reference to the fourth criterion identified on the tender evaluation worksheets entitled “4.6 Solution Evaluation/Financial”, nevertheless, these components of the tendered responses were reviewed by the PET. Having conducted the review, there were no significant issues or differences arising. Accordingly, it was decided to not score these components and exclude them from further consideration. All vendors were considered to have submitted satisfactory responses in this regard. As these components were only a very minor component of the overall assessment criteria this had no material impact on the overall outcome. Street was not sufficiently challenged in relation to this part of his evidence.
Further, Ipex complains that in the Project Evaluation Report dated 1 July 2002 no points at all were allocated to the evaluation of Ipex’s tender by the PET in respect to the criteria “Solution Evaluation/Financial” and “Solution Evaluation/Privacy and Legal” which comprised 25% of the total score for the solution criteria.
The Project Evaluation Report did not set out the scores awarded to any of the competing tenderers in relation to the financial and privacy and legal criteria.
As all tenderers were judged by equivalent criteria the decision not to take the financial and privacy and legal criteria into account did not affect the outcome of the evaluation process. This is confirmed in the case of “financial” by the electronic record which is exhibit P9.
During cross-examination counsel for Ipex referred Street to the fact that in relation to some criteria, Compaq and CSM had been scored by additional PET members (see for example the score sheet of Mr Dalby and the spreadsheet). Street could not explain why that had occurred but said that as the average score for each tender was calculated on the average number of scores, it would make an immaterial difference to the outcome. I accept his evidence in this regard.
Conclusions as to conduct
For the reasons stated (and subject to the allegation by Ipex as to admissions made by the defendant at the de-briefing meeting and dealt with in the next section) I am not satisfied that any of the conduct complained of was anything other than conduct specifically permitted and contemplated by the RFT as clarified by the industry briefing and 69 questions. The Parliament did what it said it would do. It did not depart from the RFT in any of the respects identified, and to the extent that there was any departure it was either de minimis, irrelevant or specifically permitted by the very Tender Process Agreement that I have been asked to find, and have found. The submission to the effect that Ipex scored about 14% less on quality but was about $3m cheaper is superficial and breaks down on analysis. The matters referred to by Street and the PET are relevant, appropriate and within their remit under the RFT and Evaluation Plan.
Further, and in any event, and as pointed out there were express terms of any such contract to the effect that Parliament reserved for itself the right to:
(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 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).
Accordingly and as pointed out to the extent of any departure from the RFT within any of the above terms such departure was specifically permitted.
E. Vendor de-briefing
The de-briefing meeting was held on Thursday, 8th August 2002 at 2 pm. It was attended by Street and Spurr on behalf of the Parliament, and three representatives of Ipex (Davitidis, Miles and Knightley).
Street prepared debriefing notes for each tenderer based on the significant findings of the PET. The notes were prepared as internal briefing notes intended to be points for discussion rather than to be presented to the vendors. It is contended by Ipex that admissions were made during the course of the meeting that are of some assistance to its case.
The points for discussion set out in the debriefing notes formed the basis of the discussion. These points were:
(i)Ipex as a company was well known to Parliament and there were no questions of the overall capabilities of the company;
(ii)The Ipex response met the essential conditions as outlined in the RFT;
(iii)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 and would not have taken Parliament beyond its present capabilities;
(iv)Ipex’s focus on a relatively low cost and minimal proposal was particularly evident with the low charges proposed for system Integration effort – this suggested that the response was well under-resourced, indicating that Parliament would have to undertake considerably more activities than it had intended.
Messrs Miles and Knightley do not have any recollection of what was said at the meeting. However they both gave evidence that they made notes at the meeting and after the notes were typed they discarded them. Knightley sent emails on 9 August 2002 to a Mr Cohen (Cohen) and a Mr Cook (Cook) of the plaintiff. Cook was the in-house counsel. Even with the assistance of the documentary evidence, neither witness could recall what was said at the meeting.
The typed file notes produced by Knightley and Miles refer to Street or Spurr having said at the meeting that certain information (which would particularly influence the tender evaluation and which they refer to as “touch points”,) was provided to some of the tenderers, but not Ipex.
Both Spurr and Street denied that they said any such thing during the debriefing session and that there was any list of “touch points” as asserted by Ipex.
The complaint by Ipex seemingly made on the strength of the debriefing session only, namely that other tenderers had been provided with information that had been withheld from Ipex was the basis of an allegation of corruption. That has been withdrawn.
As submitted by the defendant, if admissions had been made by Street and Spurr of corrupt or clearly inappropriate conduct (which is most unlikely in any event) one would expect that even after all these years, and especially with the assistance of notes, Miles and Knightley would specifically remember it.
Davitidis, the principal representative of Ipex who attended the meeting, was not called to give evidence. Exhibit P2 includes an email from Cook, the in-house counsel of Ipex, to Davitidis asking for his account of the meeting. Presumably, Davitidis provided such an account to Cook. However, Ipex failed to provide it or to call Davitidis as a witness. No explanation was given as to why Davitidis was not called. He is clearly an important witness and could have shed some light on the meeting particularly in light of the contradictory evidence.
Street did not accept much of the evidence as to what was said at the meeting. However, he agreed that in responding to questions about why Parliament had chosen a much more expensive and higher capability solution he said that CSM and several other vendors had submitted advanced capability proposals and in doing so had touched the “hot buttons” with Parliament.
By referring to “hot buttons” Street gave evidence that he did not mean to infer that the vendors offering these features had been given information that Ipex had not been given. Rather, those particular vendors used their own commercial judgment as to what they considered would best suit Parliament’s requirements. All vendors were treated equally and fairly. He gave evidence further that he explained that the term “hot buttons” was a colloquial expression he used to describe features in some of the responses to the RFT that Parliament liked better. In short, it meant nothing more than the Parliament found some of the proposals more attractive than others. The term was a reference to the fact that bidders had been asked to take a fresh look at delivering services in an architectural sense. Spurr in evidence confirmed that the expression “hot buttons” was used in the context of innovation and was a reference to the responses, not the criteria.
I am not prepared on the evidence to conclude that either Street or Spurr admitted that important information was provided to some tenderers and not others.[12]
[12]Not only is it unlikely that they would do so but there is no evidence apart from the suggested admission to support such a finding. In fact the evidence is to the contrary. On the evidence great care was taken to ensure all tenderers received the same information. Further the Touch Points did not need to be communicated.
In all likelihood, Miles and Knightley have simply misunderstood or inaccurately recorded what Street said. In any event, the gravamen of the allegation, that is, that there were specific touch points that particularly influenced the assessment of tender responses, but which were not included in the RFT and not provided to Ipex, was not sufficiently put to Street or Spurr in cross-examination.
The essential criticism of the Ipex bid that was communicated to Ipex during the de-briefing session was that its low cost, minimal proposal seemed under resourced. On the evidence, it is apparent that Ipex took a minimalist approach, which focused on cost. Miles acknowledged that it may have done so because it relied upon what an individual employee of the Parliament had told someone at Ipex that “cost, cost, cost” would be the major determinant. This is reflected in his note, exhibit P4. Miles acknowledged that Ipex believed it had the “inside word”.
It was an express condition of the RFT that tenderers ought not to rely upon information provided to them by any person, including employees, agents and consultants of Parliament, with the exception of matters expressly set out in the RFT or advised in writing (RFT Section 2.9).
Further, canvassing by a tenderer and/or his agents of any employee of the Parliament with respect to any matter pertaining to the RFT or the selection process was grounds for absolute rejection of that Tenderers proposal (RFT Section 2.13).
If Ipex misapprehended the selection criteria, that was not due to any fault of the Parliament or as a result of anything contained in the RFT. The fact that Ipex were “at pains to point out” at the 8 August 2002 meeting that they had been labouring under a misapprehension about “cost, cost, cost” demonstrates the absence of a causal nexus between the contents of the RFT and the tender document put forward by Ipex.
Consequently I am not prepared to find that anything of consequence was said at the meeting that would be of assistance to Ipex.
F. Conclusion and Orders
The other causes of action as pleaded all have as their underlying factual basis the conduct as alleged. It must follow that the causes of action are not made out. Accordingly it is not necessary or desirable to deal with the specific matters raised in relation to the applicability of the FTA, reliance issues and the adequacy of the evidence in relation to damages.
Accordingly I propose to dismiss the plaintiff’s claim. I will hear the parties on costs related issues.
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