Legal Blog

Compliance

Calls for tender more often than not demand that bidders submit a list of their proposed subcontractors. Sometimes they are requested to supply them after the tender, sometimes as part of the tender. What happens when those instructions are not followed to the letter? That question was answered in True Construction Ltd v. Kamloops, a 2016 decision of the British Columbia Court of Appeal.

Background

An invitation to tender called for tenderers to submit a sealed tender, including an appendix containing a list of subcontractors. The contractor submitted its sealed tender, but forgot to include the appendix. Before the bid submission deadline, the contractor, who realised its mistake, sent the appendix to the owner by way of fax. The contractor was the low bidder, but the owner disqualified the bid because, in its view, the bid did not comply, strictly or substantially, with the instructions to bidders.

Decision

The court held that the appendix formed part of the bid and was required to be submitted along with the bid and, as such, the bid was not strictly compliant. However, the owner had a clause allowing it the right to accept the bid if it were substantially compliant. Regardless, the court held that the bid was not substantially compliant because (i) the irregularity was not minor or technical in the sense that it would not be insignificant to the owner’s deliberation as to which tender to accept; (ii) the invitation contained a clause saying that the owner could reject a bid based on the bidder’s qualifications and previous experience on similar work and, since most of the work would be done by subcontractors, the identity of the subcontractors was important to the owner; and (iii) listing the subcontractors meant that the contractor had properly priced its bid and lined up the subcontractors necessary to support that price.

Finally, the court held that the subsequent faxing of the appendix, even before the closing deadline, did not rectify the non-compliance, substantial or otherwise, of the sealed bid. This methodology could have given the contractor a competitive advantage over other tenderers. The sealed bid in itself was incapable of acceptance (as found by the court); therefore, the contractor could have continued its negotiations with its subcontractors after submitting its tender and, if unsatisfied with the negotiation results, avoided the risk of being bound to perform by declining to deliver the appendix. Since the test is an objective one, it was irrelevant that the contractor did not actually attempt to continue negotiations between the time that it submitted the tender and the tender closing time.

Image courtesy of MPatterson.

Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.