BC Court of Appeal speaks on tendering – Midwest vs. BC Gas case of Contract Security


This is a righteous decision.

In our Fall 1999 issue of Construction Law Bulletin we reported that in this case the BC Supreme Court held that no duty of fairness was owed to a non–compliant bidder. BC Gas had invited proposals which required a bid amount for “de–watering costs”. Midwest submitted a “cost plus” price for this item, and in the cut and thrust of the tendering process Midwest stuck to its position even though BC Gas pointed out the non–compliance. Midwest was the lowest bidder, but BC Gas awarded the contract to the second lowest bidder who was similarly non–compliant. The reason that BC Gas chose the second lowest, as was recognized in the decision, was that Midwest had labour agreements with the Christian labour Association of Canada (CLAC) which was a non–affiliated union. Midwest cried foul, arguing that among non–compliant bidders BC Gas still had to be fair. The BC Supreme Court did not agree.

The case was appealed to the BC Court of Appeal.

The BC Court of Appeal upheld the BC Supreme Court decision, with a flourish. Here are some quotes:

“In my respectful view, the learned trial judge did not err in his conclusions in this respect. The plaintiff’s bid did not conform with the requirements of the tender documents. … The plaintiff’s counter–offer for de–watering on a cost plus basis in its covering letter did not conform to the requirements of the tender documents, and the defendant was fully justified in disregarding that proposal when it considered the plaintiff’s bid.”

“The plaintiff’s position is not advanced by pointing out that other bids received by the defendant were also non–compliant with the tender documents.”

It was open to the defendant to accept the plaintiff’s letter offer, but it cannot be treated as part of the plaintiff’s bid so as to give rise to a Contract A.

Whether an independent duty of fairness exists is a pure question of law. The learned trial judge said he knew of no “free–standing enforceable duty of fairness simpliciter”. Counsel did not refer us to any authority where such a duty has been held to exist. Such a duty is quite inconsistent with an adversarial, competitive tendering process. To find such a duty would cause great uncertainty in this area of the law … no such duty exists …

What do we take from this case? I suggest the following:

  1. Principles of contract rule. If a bidder wants to insist that the owner award the contract according to principles of “fairness”, then the bidder has to submit a bid that complies with the instructions to bidders laid down by the owner in the tender documents. If the bidder steps outside of those instructions to bidders, then the bidder has stepped outside of the Contract A / Contract B concept adopted in the Ron Engineering and MJB Enterprises Supreme Court of Canada decisions, and therefore the bidder can’t complain about it.
  2. That is not to say that owners should not be fair. As I have espoused in various other issues of this publication and in my seminars, I suggest owners should be fair regardless. But, as I see it, in this context if a bidder has sidestepped a requirement laid down in the tender package then it is fair for the owner to effectively say to the bidder “hey, its open game now, as far as you are concerned” and proceed to award based on what is most advantageous to the owner.
  3. The tender package used by BC Gas in this case built in a lot of language allowing flexibility to the owner, including the following language:

    “Without limiting the generality of the foregoing, OWNER reserves the right, in its sole and absolute discretion, to accept or reject any Tender which in the view of the OWNER is incomplete, obscure, or irregular, which has erasures or corrections in the documents, which contains exceptions or variations, which omits one or more prices, which contains prices the OWNER considers unbalanced, or which is accompanied by a Bid Bond or Consent of Surety issued by a surety not acceptable to the OWNER.”

    Good idea. The result might easily have been different if this clause was not included.

    To readers who are clients – don’t worry, I have for many years been including this strong language (and more).

  4. What amounts to “non–compliance”? In this case the court accepted that:

    “the plaintiff’s bid did not comply with the invitation to tender because it did not include a price for “de–watering” or “well pointing” as required by s. 6.01 of the Detailed Specifications, forming part of the tender documents. Rather, in a covering letter sent to the defendants with the plaintiff’s bid, the plaintiff proposed that any such work be paid for on a “cost reimbursable (or cost plus)” basis”

How often does that happen, in one form or another? In my experience, bids are frequently non–compliant.

The Court of Appeal decision will stand – it was not appealed and the time limit for appeal has elapsed.