January 4, 2012

Formalities can be fatal to validity of low bids

Bid Protest Bulletin | Paul Emanuelli

The failure to adhere to tendering formalities can be fatal to a low bidder’s eligibility for contract award.

For example, in decision in R. Litz & Sons Co. v. Manitoba Hydro, the Manitoba Court of Queen’s Bench considered the issue of tender compliance in a case dealing with three Manitoba Hydro tender calls for heavy equipment contractors. The dispute dealt with the rejection of all three tenders submitted by the plaintiff bidder. In each instance, the rejected bidder had proposed alternatives to the tender call requirements. In all three instances, the court found that these proposed alternatives constituted counter-offers that rendered the tenders non-compliant. The court explained its reasoning:

“. . . It would be unfair to other bidders . . . to give effect to a bid on a 60-ton crane where a 65-ton unit is prescribed in the RFQ or a conventional crane where a hydraulic crane is sought because other bidders might reasonably have offered the lesser equipment at a lower price. They might, in turn, have filed bids offering even lesser equipment at especially low prices. [E]ven a lay person would say that its bids are counter-offers. I therefore find that the bids in question were neither strictly compliant nor substantially compliant. They were counter-offers.”

Manitoba Hydro’s decision to reject the tenders was therefore upheld and the bidder’s action was dismissed.

In its decision in Steelmac Ltd. v. Nova Scotia (Attorney General), the Nova Scotia Supreme Court also upheld the government’s decision to reject a low bidder’s tender for non-compliance. The case involved a tender call for the installation of concrete slab reinforcements for two high schools. The low bidder was rejected after it submitted the wrong tender submission forms with its bid. The bidder sued, arguing that its low bid should have been accepted.

As the court noted, the tender call prescribed the use of a “Bid Form” that contained the requisite legal representations necessary to create a legally binding bid. However, the court found that the bidder mistakenly used a set of RFQ forms which were contained in the tender call for other administrative purposes and lacked the necessary legal formalities to create a binding bid:

The “Bid Form” requires the bidder to agree that it “Determined the quality and quantity of materials required; investigated the location and determined the source of supply of the materials required; investigated labour conditions; and has arranged for continuous prosecution of the work herein described.” No such assurances is contained in the RFQ form.

In the “Bid Form” the bidder agrees to be “bound by the award of contract and if awarded the contract on this bid to execute the required contract within 10 days after notice of the award.” No such assurances contained in the RFQ form.

Finally, in the “Bid Form” the “undersigned declares that the bid is made without connection with any other persons submitting bids for the same work and is in all respects fair and without collusion or fraud.” No such assurances contained in the RFQ form.

While the bidder maintained that the tender was substantially compliant notwithstanding the use of the RFQ forms, the court disagreed, noting that the “commitments made by use of the Bid Form are clear, unequivocal, and potentially enforceable.” The court therefore concluded that “by using the RFQ forms to submit its two bids, Steelmac was not compliant with the tender instructions and therefore in the circumstances the Province was acting correctly when it rejected the two bids”. As these cases illustrate, being the low bidder is no guarantee of contract award if the bidding paperwork is not properly executed.

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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