TENDERING AND PROCUREMENT:

BEST PRACTICESTHURSDAY, FEBRUARY 26, 2015

11:00AM-12:30PM

SPEAKERS:

William E. Knutson, QC, Principal, Shapiro Hankinson & Knutson

Mark Braidwood, Principal, Shapiro Hankinson & Knutson

Marc MacEwing, Associate Counsel, Shapiro Hankinson & Knutson

Seema Lal, Principal, Shapiro Hankinson & Knutson

Sponsored by

BASIC PRINCIPLES

Presented by: Mark J. Braidwood

BASIC PRINCIPLES

Is it a tender?

Contract A/Contract B = implied duty of fairness to all bidders

Damages - Potential liability for breach of Contract A

Privilege Clauses

IS IT A TENDER?

Basic criteria:

• Competitive procurement process

• Period of irrevocability

• Binding form of Contract B

INVITATION TO TENDER

An Invitation to Tender is commonly used when there are numerous potential bidders who can supply goods or services. The bids are evaluated against mandatory criteria.

This type of document is normally used when owners are looking only for the lowest price response that will be accepted without negotiation.

The award should be made in accordance with the criteria stated in the tender documents, although price will generally be considered the most important criteria.

CONTRACT A/CONTRACT B

The fundamental principle of the law of tendering for

construction in Canada is that that method of contract

procurement involves two stages of contractual relationships:

a) Contract A, which arises between the tendering authority and

each “materially compliant” bidder, the terms of which are

generally as set out in the tendering documents; and

b) Contract B, which is the tendered contract entered into

between the tendering authority and the successful

bidder.

DAMAGES

The Contract A/Contract B analysis means that both the

tendering authority and bidders be liable for damages from the

tendering process itself if, for example:

a) an owner purports to award a construction contract to a materially

non-compliant bidder in preference to the lowest compliant bidder;

or

b) a materially compliant bidder refuses to sign a construction

contract and proceed with the work after being awarded the

contract.

NON-COMPLIANCE

Irregularity vs. noncompliance

Waivable non-material non-conformance vs. non-waivable

material nonconformance

Material = affecting the price or performance of Contract B

PRIVILEGE CLAUSES

The lowest or any tender will not necessarily be accepted.

Tender irregularity may be a cause for rejection and can

be waived.

Price + other criteria + best interest can be taken into

consideration.

Limited or no liability for treatment of tender (Tercon).

COMMON PROBLEMS IN THE

DRAFTING OF TENDER DOCUMENTS

Presented by: J. Marc MacEwing

POOR DRAFTING

Inconsistent provisions

Inclusion of Contract B provisions

Unclear or ungrammatical wording

Inadequately worded privilege clauses

COUNTER-PRODUCTIVE “PHILOSOPHY”

Unreasonable privilege clauses

Complicated tender procedures

Mixing of negotiation with tendering

APPROACHES TO TENDERING

Lack of knowledge of tendering law

Lack of care in setting, understanding and following tender

“rules”

PRACTICE POINTS FOR TENDER

SUBMISSIONS

Have a basic knowledge of tendering law

Read and understand the totality of the procurement

documents

Clarify pre-bid questions using designated process

Quality assurance for tender preparation

Comply with all tender requirements

SUBCONTRACT TENDERS &

BID SHOPPING AND RIGGING

Presented by: Seema Lal

SUBCONTRACT TENDERS

Contract A/Contract B can apply

General contractor must stick with subcontract bid if it is

expressly picked up in GC’s tender

If it is reasonably foreseeable that awarding contract to non-

compliant bidder would result in damages to subcontractor,

tendering owner may be liable to subcontractor for its damages

BID SHOPPING

“…where a tendering authority uses the bids submitted to it as a

negotiating tool, whether expressly or in a more clandestine way,

before the construction contract has been awarded, with a view to

obtain a better price or other contractual advantage from that

particular tenderer or any of the others.”

Town of Port Hawkesbury v Borcherdt Concrete

BID SHOPPING (CONT.)

Integrity and efficiency of the tender process depends on

parties not seeking unfair advantage and, in particular, by not

bid shopping

Consultants may be exposed to liability if their negligence or

breach of contract leads the tendering party/owner to breach its

bid contract with one or more tenderers (Stanco Projects v Her

Majesty the Queen et al)

BID SHOPPING (CONT.)

Examples of conduct that could be considered bid shopping:

• Stanco Projects – using a bid supplied by a tenderer to negotiate

lower prices with another tenderer or third party (during the tender

period)

• Dynasty Roofing – prime contractor, after being awarded contract

by the Owner, using lowest bid from subcontractor as basis to

bargain an even lower price with second lowest subcontractor

• Town of Port Hawkesbury – the tendering authority breached

duties of fairness owed to the only bidder by awarding the contract

to itself prior to formally terminating the tender process

BID RIGGING

Involves a secret agreement on bids or tenders to frustrate or

manipulate competitive bidding process

It is a criminal offence under s. 47(2) of the Competition Act,

RSC 1985, c. 34

• Could lead to fines or imprisonment up to 14 years

BID RIGGING (CONT.)

47. (1) In this section, “bid-rigging” means

(a) an agreement or arrangement between or among two or more persons

whereby one or more of those persons agrees or undertakes not to submit a

bid or tender in response to a call or request for bids or tenders, or agrees or

undertakes to withdraw a bid or tender submitted in response to such a call

or request, or

(b) the submission, in response to a call or request for bids or tenders, of

bids or tenders that are arrived at by agreement or arrangement between or

among two or more bidders or tenderers,

where the agreement or arrangement is not made known to the person calling for

or requesting the bids or tenders at or before the time when any bid or tender is

submitted or withdrawn, as the case may be, by any person who is a party to the

agreement or arrangement.

SHK LAW CORPORATION

Bill Knutson, QC 604.408.2030 (wek@shk.ca)

Seema Lal 604.408.2026 (sl@shk.ca)

Mark Braidwood 604.408.2021 (mjb@shk.ca)

Marc MacEwing 604.408.2031 (jmm@shk.ca)