Much ink has been spilled analysing tender contracts (i.e. contract A) and determining their implied terms in light of that analysis. However, like any breach of contract case, a finding of liability for breach of the tender contract is just the first part of the analysis. The second, and equally important, part is the quantification of the damages that flow from the breach. This second part was front and centre in Elan Construction v. South Fish Recreational Association, a 2015 decision of the Alberta Queen’s Bench.
The owner was building an arena. It solicited tenders and pre-qualified a number of general contractors to provide them. It created a matrix to evaluate the tenders based on four criteria: price, completion date, experience, and references. Each criterion was given a maximum point allocation.
The owner received the tenders, evaluated them using the matrix, and awarded the contract to the second lowest bidder (the “winner”); the low bidder (the “loser”) was a sore loser and commenced an action against the owner. It alleged that the owner used undisclosed criteria in its evaluation and allowed the winner to compete unfairly. It claimed damages for loss of its contemplated profit of $705,000.
While matrix evaluations are acceptable, the evaluations must comply with the matrix criteria and the information provided in the tender documents. This allows a disgruntled bidder an opportunity to second-guess the evaluation.
The judge held that the owner’s analysis was problematic because it:
- evaluated the completion dates using an arbitrary standard that bidders could not have contemplated
- gave greater weight to arena construction experience rather than to ordinary commercial experience, without disclosing that criterion
- took LEED into account without mentioning it as a criterion
- made no mention that there would be an interview and pressured the loser to attend the interview without its key representatives being available
- allowed the winner to substitute another, and better, superintendent after the bid and before evaluation.
The judge accounted for all of these problems and decided that, had the evaluation been done properly, the loser would have been allocated more points than the winner and would have been awarded the contract.
The loser won on liability.Continue Reading >