Unfinished Business: The Importance of a Flawless Bid in the Tender Process
February 2023 - 3 min read
If a submitted tender does not strictly comply with all the mandatory requirements of the tender package, the owner can and should reject that tender. This ensures that all bidders are treated fairly – the overarching purpose of the public tender process.
In Canada, public bodies must issue an open call for tenders for construction contracts. This process is well established under Canadian Law, dating back to the 1981 Supreme Court decision in Her Majesty the Queen in Right of Ontario v Ron Engineering. This case established that securing a public construction project involves two contracts, Contract A and Contract B:
- Contract A refers to the contract between the bidder and the public body when the tender is submitted.
- Contract B refers to the construction contract awarded to the winning bidder.
What happens when a construction company works hard to craft the lowest compliant bid yet fails to satisfy all terms and requirements set out in the tender package? Can the bid still be accepted as long as all the essential elements are present? This issue was brought to the Newfoundland Supreme Court in Redwood Construction Ltd. v Memorial University of Newfoundland.
Memorial University ("Memorial") wanted to build a new four-story building on its campus, so they issued "Open Call Documents" to tender the construction. Memorial set the deadline to submit bids for 3:00 PM on August 27, 2020.
Redwood Construction ("Redwood") submitted its bid at exactly 3:00 PM. However, their bid was missing three pages, including one which required a signature from an authorized representative as a formal expression of consent to be bound by the terms of Contract A. Redwood then submitted another bid at 3:10 PM that included the missing pages.
Memorial rejected Redwood's first bid because it was missing three mandatory pages and rejected its second bid because it was submitted past the deadline. Although Redwood had the lowest bid, Memorial awarded Contract B to the second lowest bidder.
Redwood sued for breach of Contract A. It argued that its bid should have been accepted despite the missing pages because it included all essential elements required by the tender package. Redwood further stated that since an authorized representative submitted their bid electronically, that electronic submission should satisfy the signature requirement. In response, Memorial asserted that it was under a legal obligation to reject Redwood's non-compliant bid.
The Court reiterated that an open call for tenders constitutes an offer for Contract A. Valid bids conform to all terms and requirements of the tender package. The validity of a bid is assessed at the time it is submitted. Submitting a compliant bid constitutes acceptance of Contract A.
After reviewing the tender package, the Court stated that the signature requirement was a mandatory term of Contract A, the absence of which would invalidate a bid.
The Court's next consideration was whether an authorized representative submitting a bid was sufficient to constitute a signature in compliance with the tender package. Although the tender package allowed for electronic consent as an alternative to an actual signature, the fact that an authorized representative electronically submitted Redwood's bid did not satisfy that requirement.
The Court distinguished this case from cases that found a valid contract may exist despite deficiencies where the parties have agreed to all essential elements. Those cases did not apply to the tender process. Essential elements of a bid are those stated as requirements in the tender documents. Therefore, a bid missing any mandatory details — even if seemingly trivial — will invalidate a bid.
Since there was no evidence that the authorized representative of Redwood intended the email tender submission to constitute a valid signature, the bid was deemed non-compliant, and Memorial was legally obligated to reject Redwood's bid.
Applicability in Alberta
While this case was decided in Newfoundland, its principles apply to the Alberta and Northwest Territories construction industries. The rules respecting Contract A and Contract B are applicable across Canada. All courts will decide similar cases in a way that preserves fairness in the tendering process. This case demonstrates the importance of bidders complying with all stated terms and requirements in a tender package, as anything less than complete will be rejected.
While this may seem unfair, ensuring rigid compliance with all requirements of the tender package provides a level playing field where all bidders know that they will be treated the same – even if that treatment at times results in tough love.
Tender compliance and litigation is a complicated area of law. Contact Anthony Burden or Todd Kathol in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law's Construction Law Group if you believe your bid was improperly rejected, or a competitor's non-compliant bid was improperly selected.
Link to decision: Redwood Construction Limited v. Memorial University of Newfoundland, 2023 NLSC 4