November 30, 2011

Column | Bid Protest Bulletin

Courts reject legal claims against construction project owners from contractors submitting non-compliant bids

Paul Emanuelli

An owner has both a right and a duty to reject a non-compliant tender. A bidder seeking to challenge an owner’s tendering process should therefore carefully consider whether its tender contains any material flaws, since those flaws can prove fatal to its claims. In such instances, bidder non-compliance can serve as an owner shield that blocks the bidder’s remedy.

In its decision in Dominion Construction Co. v. Keewatin-Patricia District School Board, the Ontario Superior Court of Justice dismissed the plaintiff bidder’s claim due to that bidder’s non-compliance. The case dealt with a tender call for the construction of an elementary school. The plaintiff submitted the lowest bid but the School Board cancelled its procurement process and issued a new tender call. The low bidder sued. The court found that the low bidder was not prejudiced by the decision to cancel and reissue the tender call since its tender was non-compliant. The defendant owner was therefore found not liable. The low bidder’s non-compliance proved fatal to its claims and it lost out on $125,000 in lost profit damages due to the application of the clean tender doctrine.

In its decision in Cityscape Contracting v. Edmonton (City), the Alberta Court of Queen’s Bench applied the Supreme Court of Canada’s Double N Earthmovers Ltd. v. Edmonton (City) decision to another tendering dispute involving the city of Edmonton.

In this case the city issued a tender call for the construction of an indoor soccer facility. The tender call specified that the supplier of the prefabricated building would have to be CSSBI/CSA-A660 certified in accordance with the standard prepared and published by the Canadian Standards Association. The low bidder was rejected for failing to provide proper price breakdowns and failing to list its proposed subcontractors.

The second-lowest bidder provided that information. However, its tender was rejected when the city discovered that the subcontractor named in the tender to supply the prefabricated building did not have the required certification. The second lowest bidder sued. The court sided with the city.

In its decision in Karl Mueller Construction v. Enterprise Settlement Corp., the Northwest Territories Supreme Court rejected a claim made by a non-compliant low bidder. The case involved a municipal tender call for solid waste collection and disposal. The tender call required a “standard packer type garbage truck or a dump type vehicle”. However, the low bidder proposed a standard pickup truck.

After its tender was rejected as non-compliant, the low bidder sued, asserting that it intended to convert the pickup truck into a dump truck with a hoist if it was awarded the contract. Since its tender did not state this intention, the court agreed with the owner’s decision to disqualify.

The court then noted that the failure to submit a compliant tender precluded the non-compliant bidder’s ability to successfully bring claims based on the owner’s duty of fairness. As the court stated:

“Counsel for Enterprise acknowledged that all of the tenders received contained some deficiencies. I need not, however, go on to determine whether the tenders other than KMC’s were also non-compliant because, if they were, they would all amount to counter-offers and Enterprise could accept any one of them. A duty of fairness does not arise in those circumstances, giving KMC no grounds for complaint.

“In light of my decision that KMC’s bid did not comply with the tender requirements, I need not deal with the other arguments made about the fairness of the tendering process in this case.

“The action is accordingly dismissed.”

As these cases illustrate, a bidder’s non-compliance can serve as an effective shield to protect an owner against a bidder’s legal challenge.

This article is extracted from Emanuelli's Government Procurement textbook published by LexisNexis Butterworths. Reach Paul at paul.emanuelli@procurementoffice.ca.

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