Prohibited to act or bid: Overview, definition, and example
What is prohibited to act or bid?
"Prohibited to act or bid" is a clause commonly found in procurement contracts, joint venture agreements, or conflict-of-interest policies. It restricts a party—or certain individuals or entities—from participating in a bidding process or acting in a specified role, often to prevent unfair competition, insider advantage, or regulatory breaches.
Why is prohibited to act or bid important?
This clause helps ensure transparency, fairness, and compliance in competitive or regulated environments. It prevents situations where a party has access to non-public information or holds a conflict of interest and still attempts to bid on or influence the outcome of a project. In many cases, it also helps maintain trust in public tenders, joint ventures, or restructuring processes by setting clear boundaries on who can participate and how.
Understanding prohibited to act or bid through an example
A consulting firm helps a government agency draft technical specifications for a public infrastructure project. Later, that same firm tries to submit a bid to execute the project. Because the original agreement included a "prohibited to act or bid" clause, the agency disqualifies the bid. The clause was designed to prevent the firm from benefiting unfairly from inside knowledge gained while helping shape the scope of the project.
Example of a prohibited to act or bid clause
Here’s how a prohibited to act or bid clause may look like in a contract:
"The party acknowledges and agrees that, having been involved in the preparation or design of the procurement documents, it shall be prohibited from submitting any bid, proposal, or tender for the project, or from participating in any capacity in a bid submitted by another party."
Conclusion
The "prohibited to act or bid" clause supports integrity and fairness in competitive processes by keeping insiders or conflicted parties from gaining an unfair advantage. It is especially relevant in government contracts, restructurings, or any deal involving sensitive planning or strategic input. If your role gives you access to confidential or foundational information, this clause may limit your ability to later participate as a bidder.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.