When do councils need to invite tenders for their contracts?

Councils need to invite tenders for certain contracts, in certain circumstances, but are not required to tender for each and every contract they enter into.

Section 55 of the Local Government Act 1993 (LG Act) specifies the types of contracts which council must invite tenders for. The list is pretty broad and encompasses most types of contracts that a council might enter for the provision of goods or services.

However, Councils are not required to invite tenders for every contract. There are exceptions to the rules. For example, were a contract has an estimated expenditure less than $150,000.00, council is not required to invite tenders.

Council also is not required to submit to tender a contract of employment, contracts entered into with other councils, a contract for the sale of land, or a contract entered into in the case of an emergency, just to name a few.

The most interesting exemption to the tendering requirements of the LG Act (in our opinion) is contained in section 55(3)(n), which states that council need not invite tenders for:

‘… a contract where, because of extenuating circumstances, remoteness of locality or the unavailability of competitive or reliable tenderers, a council decides by resolution (which states the reasons for the decision) that a satisfactory result would not be achieved by inviting tenders’.

What this basically says is that if the elected Council forms the view that there are extenuating circumstances, and gives reasons for why there are extenuating circumstances, then they can pass a resolution to remove the requirement to invite tenders on the basis that a satisfactory result would not be achieved by inviting tenders. There are no express standards or criteria that must be met before a council is considered to have validly decided on this course of action.

This specific provision was considered by the Land and Environment Court in SOCARES Support Group Inc v Cessnock City Council [2012] NSWLEC 23 (SOCARES), where at [54] Pain J held that ‘the relevant test is whether the Council was satisfied of a certain matter on the basis of the material before it’.

The decision in SOCARES suggests that where a council satisfies itself that the circumstances in the context of the proposed contract are extenuating, involve a remoteness of locality or unavailability of competitive or reliable tenderers, the tendering provisions of the LG Act will not apply.

Her Honour was satisfied that the decision to make the resolution was based on material ‘that suggests that it was reasonable for the Council to be satisfied that extenuating circumstances existed’.

Accordingly, if a council has made a resolution in accordance with s55(3)(i), having regard to material which suggests that it is reasonable to conclude that extenuating circumstances exist, the decision is valid and the council does not have to invite tenders.

If you would like to know more about the powers of councils, you can review our article on a council’s power to enter your land, or our article on what to do if council gives you an order.

If you would like any further information or help, please contact us.