Earlier this year, the Supreme Court of Canada rendered a surprising decision involving the law of tenders in the matter of Double N Earthmovers Ltd. (Double N). We believe contractors should be aware of the content of this decision which may very well have an impact on their future bids.
The City of Edmonton issued a call for tenders seeking heavy equipment services over a certain period of time. The City required that the equipment offered by bidders be described in the tender (make, model, serial number, etc.) and that the models offered be recent (1980 or newer).
Sureway Construction of Alberta Ltd. (Sureway), Double N's competitor, submitted the lowest bid. One of the machines specified by Sureway was described as being a 1980 model, although it was in fact a 1979 model. As regards a second machine, Sureway indicated that it was a "1977 or 1980 rental unit."
Double N informed the City that Sureway did not have any 1980 or newer equipment. The City made no verifications and awarded the contract to Sureway. It negotiated a price reduction for a portion of the contract and agreed to have the work carried out with pre-1980 equipment.
Double N, alleging that the tendering process had been carried out unfairly, sued Sureway and the City of Edmonton for damages.
Double N's action was dismissed. According to the Court, on its face, Sureway's bid was not non-compliant and the City had no obligation to investigate whether Sureway's bid included false information, notwithstanding Double N's statements to that effect. The Court was of the opinion that Sureway had been bound by its bid as submitted and the City could have insisted that it comply therewith. Moreover, one of the clauses of the call for tenders specified that the City could waive the non-compliance of bids.
Finally, once Sureway's apparently compliant bid had been accepted, the City was entitled to waive certain requirements of its call for tenders and negotiate modifications to the contract. Indeed, the possibility of such negotiations had been mentioned in the City's call for tenders.
First, it should be noted that the City of Edmonton's call for tenders did not require that bidders own pre-1980 or newer equipment at the time of submitted a bid. Thus, in this case, ownership of such equipment was not a pre-condition for bidding. However, the absence of an obligation on the part of a client to verify the truthfulness of information contained in a bid, and the possibility for the client to negotiate the content of the contract and its contractual requirements once the contract has been entered into on the basis of an apparently compliant bid, casts a pall over the entire law of tenders.
In our opinion, this ruling significantly slackens the necessarily binding nature of tender rules. As a result of this looser framework, bidders will not have to be as thorough as regards the accuracy or truthfulness of the information set out in their bids. Consequently, their primary goal will be to submit the lowest bid and negotiate later!
We do not think such a slackening of the rules is desirable. To safeguard against inopportune haggling, it is in the interests of contractors, and the industry in general, to ensure that the terms of calls for tenders are applied rigorously, because these terms have a real impact on the ranking of bidders. Otherwise, bidders may find themselves subjected to arbitrary processes and decisions by clients.
Regrettably, it seems that the Double N Earthmovers decision clearly runs counter to the rigorous framework that should apply to calls for tenders.