Its amazing how many cases there are in the tendering field. The Elite Bailiff case is interesting to me on a few aspects, discussed below:
1. General Commentary
Following is general commentary from the reasons for judgement that I think are interesting:
“Since at least 1981, Canadian lawyers and judges have approached tender bids and awards made pursuant thereto, as involving two contracts – Contract A, the initial contract formed when compliant bids are submitted in response to a call for tenders, and Contract B, the contract awarded on acceptance of the successful bid. … In recent years, the Supreme Court has added refinements to this general approach. In M.J.B. … the Court, rejected the proposition that the lowest valid tender must always be accepted, notwithstanding a “privilege” clause. It recognized that the lowest-priced bid might not, at the end of the day, provide the owner with the best value and that by virtue of a privilege clause, the owner was entitled to take a “more ‘nuanced’ view of cost” than suggested by Ron Engineering. Conversely, the Court stressed that an owner may not rely on a privilege clause where it failed in its duty to “[make] express all the operative terms of the invitation to tender.”
“A privilege clause reserving the right not to accept the lowest or any bids does not exclude the obligation to treat all bidders fairly. Nevertheless, the tender documents must be examined closely to determine the full extent of the obligation of fair and equal treatment. In order to respect the parties’ intentions and reasonable expectations, such a duty must be defined with due consideration to the express contractual terms of the tender. A tendering authority has the right to include stipulations and restrictions and to reserve privileges to itself in the tender documents.”
2. “Duty to Act Fairly”
In Elite Bailiffs, the Ministry of the Attorney General sought tenders from parties interested in providing court bailiff services. Past experience in executing court orders was stated in the RFP to be an important factor in the assessment of bids. Most bidders, although invited to submit a bid, had no direct experience in executing court orders. So the evaluation team decided to make assumptions that it thought would be fair to all bidders. The Court agreed that the assumptions made were fair – but still held the owner liable. The Court stated:
“I have no doubt this was done in an effort to be fair to all proponents and not to “skew” the process one way or the other, given the non-availability of references from government creditors concerning proponents who were not already court bailiffs. But by assigning the pre-determined number of points, the evaluation committee failed to assess the actual experience of proponents who had not been court bailiffs. … because of the pre-determined number of points assigned to certain proponents (i.e., those without direct court experience), arbitrariness … crept into the process, making it unfair. On this basis, I conclude that the trial judge was correct to conclude that the Ministry breached its obligation of fair and equal treatment under Contract A.”
This reinforces what we already know – as an owner, you can try to be fair to everyone, but still be held liable. Tendering is a risky activity. Often, despite all efforts to be fair, if you award the contract to party A, you could successfully be sued by party B, and if you award to party B, then you could successfully be sued by party A.
3. “Release of Owner Liability”
The RFP included a clause as follows:
“3.9 Limitation of damages
In addition to the preceding paragraph, the proponent, by submitting a proposal, agrees that it will not claim damages in excess of an amount equivalent to the reasonable costs incurred by the proponent in preparing its proposal for matters relating to the agreement or in respect of the competitive process, and the proponent, by submitting a proposal, waives any claim for loss of profits if no agreement is made with the proponent.”
The Court upheld this clause. I have been including a clause like this in my tender documents for many years.
In the Ken Toby case in 1999, the British Columbia Court of Appeal upheld a similar clause contained in the Rules of the Bid Depository. My comments on that case (in a previous issue of this publication, Tender Tidbits, Fall 1999) are perhaps worth mentioning again here:
“There is no reason why this should be restricted to the Bid Depository context.
Owners and procurement managers would be well advised to include a clause of this kind. Don’t expect that it will work if you have not been fair in the process. However, in some cases it will help, as seen in the Ken Toby case.”