Health Sector Procurement - What are the Risks?

Implications of the process contract rules on health sector procurement.

Those involved in health sector procurement activity, whether it concerns the provision of medical equipment or the construction of major health infrastructure, need to be aware of the risks that may arise.

Public sector health service providers invest considerable resources into the tendering process. Accordingly, when tenderers engage in the tender process they have a legitimate expectation that they will be treated fairly, equitably and with due process. In response to this legitimate expectation, a body of case law in Australia has developed, which deals with the protection of that legitimate expectation. Specifically, a discrete contract has evolved, known in Australia as the process contract.

The Process Contract

The process contract is a contract between each tenderer who submits a bid and the principal calling the tenders. Whilst historically it was considered that there was no contractual relationship between the principal and any tenderer until such time as the principal nominated a preferred tenderer and a contract for the provision of works, goods or service was executed, the development of the process contract creates a contractual relationship between tenderers and principals.

Relevant Case Law

This concept was first established in the United Kingdom in 1990 in the case of Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 (Blackpool). In this case the Court found that when submitting a tender, a tenderer who submits a conforming tender before the deadline, is entitled, as a matter of contract, to expect its tender will be opened and considered with other conforming tenders.

The Facts

Blackpool Borough Council owned and managed Blackpool airport. The Council granted a concession to an air-operator to operate pleasure flights from the airport.

When the concession was due to expire, the Council...