British Columbia’s competitive construction industry sees its fair share of intense bidding wars between contractors. To avoid the risk of underbidding, contractors may be tempted to submit their bids at the last possible second to include the latest quotes and ensure cost projections are as complete as possible. In doing so, however, contractors must still follow the proper tendering procedures. In the case of True Construction Ltd. v. Kamloops (City), the BC Court of Appeal upheld an owner’s decision to refuse a contractor’s non-compliant bid, even though it was the lowest submitted.
The Facts
In this case, the City of Kamloops (the “City”) issued an invitation to bid on the construction of a new fire hall (the “Project”). One of the tender requirements was for contractors to include a list of subcontractors to be used at the Project in an appendix to their bid. However, the contractor (the “Contractor”) submitting the lowest bid initially failed to include the appendix containing this information. Although the Contractor later faxed the required appendix to the City, the City refused to permit faxed revisions to its bid. Ultimately, the City determined that the bid was defective. The contract for the Project went to the next-highest bidder and the Contractor sued the City for damages.
The Decision
The Court of Appeal agreed with the City that the bid was not tendered correctly. The list of subcontractors was found to be critical in determining the proper party to be awarded the contract for the Project.
The Court further held that the Contractor had taken advantage of the tendering process by faxing the appendix containing its list of subcontractors after its bid was originally submitted. This resulted in an unfair advantage to the Contractor, who was able to continue negotiating its subcontracts even after its bid was submitted. Because its bid was not legally capable of acceptance without the appendix, the Contractor was able to wait until the last possible moment to determine whether the Project would be profitable before finalizing its bid. If the price of its subcontracts turned out to be too high, the Contractor could simply withhold the appendix and refuse to finalize its bid. Those contractors who submitted a binding bid including their lists of subcontractors would not have the same option to walk away if the accepted price turned out to be too high. The court refused to allow the Contractor to gain an advantage by failing to follow the material terms of the City’s tender.
In its decision, the Court focused on the need to uphold the integrity of the tendering process. Whether the Contractor actually did secure an advantage was seen as immaterial. The real issue was whether the Contractor’s practice created a potential competitive advantage and undermined the integrity of the bidding process. Ultimately, the Court found that it did and the City’s decision to exclude the non-compliant bid was vindicated.
Lessons Learned
When submitting a bid in a tendering context, be sure to follow all the requirements contained in the invitation to tender. Owners often reserve their contractual right to disqualify improper bids, even if they are the lowest. Even though bending the requirements of the tender might appear to create a temporary advantage, it might actually prevent you from winning the bid in the long run.
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This article was written by Andrew D. Delmonico, a lawyer, and John Wiebe, an articled student, who practise in construction law with the law firm of Kuhn LLP.This article is only intended as a guide and cannot cover every situation. It is important to get legal advice for specific situations. If you have any questions or comments about this case or other construction law matters, please contact us at 604.864.8877.
