The South Australian Department of Planning, Transport and Infrastructure (DPTI) issues a call for tenders for the design and construction of a guided bus tunnel from Hackney Road to the Adelaide CBD, a project known as the O-Bahn City Access Project and estimated to cost $160 million. The tender call is based upon DPTI's standard request for tender (RfT) conditions (which can be accessed on the course website under the Week5 Tendering topic).

The tenders received are to be assessed in accordance with the process set out in the CT Annexure B for Building Contracts. The tender close date was 2pm on 5 February 2019. Conforming tenders were submitted for the O-Bahn City Access Project by three tenderers as follows:

Tenderer Tender Price

KLM Engineering Ltd $155, 655,000 Lend Lease $158, 990,000

Built Environs $161, 250,000

After assessing the tenders, DPTI appoints Lend Lease.

Upon receiving the news that it has not been awarded the contract, KLM Engineering is upset and disappointed especially when it discovers that its bid was significantly lower than Lend Lease's bid. Furthermore, KLM has expended considerable resources in compiling and submitting their tender, estimated to be in the order of $250,000.

KLM refuses to accept that DPTI has assessed the tenders fairly and properly in accordance with the assessment process set out in the RfT, and in a way that obtains best value in the expenditure of public money. KLM claims that DPTI, as a public authority, is under a duty to run tender processes in the fairest of manners and to obtain best value for money as is set out under section 3(1) of the State Procurement Act 2004 (SA). On this basis, KLM commences a legal action against DPTI in order to seek redress.

How to advise on the likely outcome of this legal case. Relevant judicial precedent and reasoning should be mentioned from the following cases:

Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151

IPEX ITG Pty Ltd (in liq) v State of Victoria (2010) VSC 480