RC106 MayJune2023 - Magazine - Page 26
LEGAL
“The duty of fairness is an obligation to treat all
bidders equally, and not arbitrarily or capriciously,
and in accordance with the stated selection procedure.”
3. REQUEST BID CORRECTION Depending on the terms of the
owner’s bid documents, it will generally be less risky
for the owner to request further information or clarification on a particular point from all bidders than to waive
criteria. Whether this option is attractive to an owner will
depend on the nature of the non-compliances.
Bid documents will often permit the owner to request
clarification or rectification in respect of immaterial
non-compliances that can be simply rectified through
further clarification. However, these clauses typically do
not permit rectification of material non-compliances. If
the owner asks bidders to correct a material non-compliance, the owner must ensure that all bidders receive an
equal opportunity to do so, and that the opportunity for
bid correction does not disproportionately favour any
particular bidders.16 The owner should request information in a consistent format and provide a timeline for bid
corrections that is reasonable and fair to all.
What to avoid
When there are no compliant bids, owners must be careful not to engage in bid shopping—the practice of obtaining a bid from one bidder and then taking it to another
bidder to see if they will match or beat it.
This not only exposes owners to liability, but it can
have damaging reputational repercussions. In Stanco
Projects Ltd v British Columbia (Ministry of Water, Land and
Air Protection), none of the bids received in the tendering
process for upgrading the water system in Cypress Provincial Park provided a separate price for an epoxy-coated tank, as requested by the owner.17 The owner’s
Appendix C to the tender package did not specifically
set the requirement for a separate price in the Schedule
of Prices. The owner told the lowest bidder that it would
be awarded the Construction Contract and requested a
price for the epoxy-coated tank. However, the owner also
elicited prices from the other bidders and then urged the
lowest bidder to reconsider its price. This conduct was
considered bid shopping and the owner was found to
have breached the duty of fairness.
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RENEW CANADA – MAY/JUNE 2023
Practice tips for owners
Some careful thinking and strategy before a call for
tenders can go a long way in minimizing risks. Owners
should always obtain legal advice and, in the absence of
an experienced internal procurement team, the assistance
of procurement specialists.
One way in which owners can simplify evaluation
is by preparing the tendering documents in a way that
makes bids easier to evaluate. For example, bids could be
requested in a format that mirrors the evaluation criteria, so as to make bids easier to evaluate and compare
in accordance with the criteria. This will also make it
much easier to identify any missing information or other
non-compliances.
Owners should also establish and clearly articulate
processes in the tendering documents for how bidders
can clarify their bids, and how the owner can seek more
information or clarification from bidders. Not only does
this provide guidance for when mistakes are made, it
allows the owner an opportunity to think through its
duty of fairness obligations and vet its procedures when
tensions are low.
What if the owner gets it wrong?
Damages
Damages are a monetary award for parties that have been
legally wronged to compensate for losses suffered as a
result of that legal wrong. The intention is to put these
parties into the position they would have been in had the
wrong not occurred.
If an owner breaches its duty of fairness in selecting a
successful bidder (i.e. by selecting a bid with a material
non-compliance), it is liable for damages equal to the profit
that would have been made on the next lowest compliant
bidder’s bid. This is because the next lowest compliant
bidder can argue that its bid would have been selected and
that it would have been awarded the contract at that price
had the owner not breached the duty of fairness.
Case law is inconclusive as to the damages awarded
to an unsuccessful party whose bid was deficient in the
same respects as the successful party. Logically, if the
next lowest bidder’s bid is equally deficient, it would not
have been awarded the Contract B in any event. Therefore, the next lowest bidder has not actually suffered any
losses, even if the owner breached the duty of fairness.
If there are no compliant bidders, arguably no one has
suffered any damages as a result of the owner accepting a
non-compliant bid.
Nonetheless, this is not a reason for owners to proceed
recklessly. Public owners in particular are often subject to
additional transparency and fairness requirements and must
assess the risk of appearing careless more conservatively.
Reputational Impact
If an owner breaches the duty of fairness, there can
also be significant reputational consequences. Most
industries, and particularly the construction industry, are
quite close knit. The market is competitive and owners
regularly running tendering processes (as, for example,
public bodies are often required or best advised to
do) cannot afford to develop a reputation for running
unfair processes. This is particularly true in market
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