The Central Tenders Board and another v White

A procedural defect in a public tender does not automatically make the resulting contract void. An instruction that non-compliance is liable to cause rejection leaves a discretion and does not impose automatic rejection. Where a public body has legal power to make the kind of contract in question, failure to follow a procedure created by the body itself is not, in the proper sense, ultra vires. The consequences of any irregularity require a flexible assessment of the breach, the injustice and public inconvenience of invalidity, the legislative purpose, and alternative remedies. A lawfully made contract with a good-faith contractor should not ordinarily be nullified. An unsuccessful tenderer who loses a genuine chance through unequal treatment may instead claim damages.

The Central Tenders Board invited tenders for construction of a school hall. White submitted the lowest tender but left the completion period blank in the form of tender; the period appeared, with slight ambiguity, in his construction programme. The CTB accepted the tender, then withdrew the award after another contractor complained that the submission was non-compliant.

White brought judicial review proceedings claiming damages. Benjamin J (Ag) held that the CTB had breached the contract and ordered compensation to be assessed; the Court of Appeal upheld that decision. The Privy Council considered whether the tender was invalid or the CTB acted without power, whether a contract had been formed, and whether it could be cancelled before formal execution.

The appeal was dismissed. The Board advised Her Majesty accordingly.

1. Contract formation. White’s tender was an unconditional written offer. The CTB accepted it by letter, so a contract came into existence before the later discussions about executing formal documents.
2. Meaning of the tender instructions. The requirement that completion time be stated in the form of tender was not expressed to make non-compliance automatically fatal. The wording that non-compliance was liable to cause rejection meant that rejection was discretionary. The CTB therefore retained power to assess the significance of the omission, particularly since the necessary information appeared in the construction programme.
3. Statutory power and procedural irregularity. Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1 illustrated the distinct case where a public body purports to make a contract of a kind beyond its legal power. Here, Finance (Administration) Act section 57 and the Procurement and Stores Regulations gave the CTB power to accept or reject tenders. The CTB’s failure to comply with a procedure it had itself prescribed was not ultra vires in the proper sense. A court should not nullify a contract made under legal power with a good-faith contracting party unless the party’s interests are adequately protected.
4. Consequences of irregularity. The former rigid distinction between mandatory and directory requirements has been replaced by a flexible assessment, reflected in London and Clydeside Estates Ltd v Aberdeen District Council [1980] 1 WLR 182 and R v Soneji [2006] 1 AC 340. Relevant matters include the seriousness of the breach, the injustice and public inconvenience of invalidity, the legislative purpose, public expense, hardship to third parties and alternative remedies.
5. Remedy for unsuccessful tenderers. Following the approach illustrated by Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195, an implied contractual duty of fair and equal treatment may arise between a tendering authority and invitees. A breach causing loss of a chance of obtaining the contract may sound in damages without setting aside the successful contract.
6. Formal execution. The CTB could not rely on the cancellation provision for failure to execute formal documents. Execution required both parties, and the government had postponed the proposed execution meetings. The documents had to be provided and a proper deadline set before the provision could be invoked.

• Privy Council: Appeal dismissed; the Board advised that the award and compensation decision should stand.
• Court of Appeal of the Eastern Caribbean Supreme Court (Montserrat): Upheld the decision of Benjamin J (Ag).
• High Court: Found the Central Tenders Board in breach of contract and ordered compensation to be assessed in default of agreement.