Invitations to Tender: Why it is Important Both Bidders and Solicitors to Follow Proper Process
Government and non-government actors that solicit bids for contractors for management or construction projects must follow a fair and transparent process for doing so. One of the key elements of a proper bidding process is that the soliciting party (the party requesting bids) and a bidder (the party seeking to obtain the offered contract) cannot cooperate with each other to alter the requirements of the tendering process. This ensures the integrity of the tendering process and that it is fair for all potential bidders. The recent Court of Appeal decision of Maglio Installations Ltd. v. Castlegar (City), 2018 BCCA 80 (CanLII) reaffirmed the limits on how much flexibility a soliciting party has in adopting, changing, altering or forgiving requirements of an invitation to bid.
In Maglio, the city of Castlegar had put out an invitation to tender for the construction of a recreational swimming area. Marwest Industries Ltd. (“Marwest”) submitted the bid that was accepted by Castlegar. Maglio Installations Ltd. (“Maglio”), another bidder, argued that Marwest’s bid was non-compliant with the tendering requirements and that the court should award the contract to Maglio since its bid was compliant. In particular, Maglio argued that Marwest did not include a preliminary construction schedule, which was a tendering requirement, and that Castlegar erred by relying on the following clause in forgiving said omission:
The City reserves the right to reject any or all tenders, to waive defects in any bid or tender documents and to accept any tender or offer which it may consider to be in the best interest of the City. …
The Court of Appeal reviewed the established principles for disputes involving tenders described as the Contract A/Contract B framework established in R. (Ont.) v. Ron Engineering, 1981 CanLII 17 (SCC),  1 S.C.R. 111 as was further summarized in Graham Industrial Services Ltd. v. Greater Vancouver Water District, 2004 BCCA 5 (CanLII) and detailed further in M.G. Logging & Sons Ltd. v. British Columbia (Forests, Lands & Natural Resource Operations), 2015 BCCA 526 (CanLII). The principles of that framework include:
- an owner’s invitation to tender constitutes an offer to all potential bidders;
- a contract, “Contract A”, comes into existence when a contractor submits a bid in response to the invitation to tender;
- the terms and conditions of Contract A are governed by the terms and conditions of the invitation to tender;
- the rights of the parties crystallize when a tender capable of acceptance is submitted on an objective view of the material requirements of the invitation to tender;
- if Contract A fails to materially comply with tender specifications, the rights of the parties to Contract A do not come into existence;
- assessing material compliance is a two-part test analyzing (1) whether there is a failure to address an important/essential requirement of the tender documents and (2) whether there is a substantial likelihood that the defect would have been significant to the owner’s decision-making process when considering the rational of the invitation to tender requirements, effective fair competition and reasonable expectations of parties; and
- discretion clauses in an invitation to tender cannot be utilized to give force to materially non-compliant bids; rather, such clauses can only be used to forgive minor defects in substantially compliant bids.
After considering the principles detailed, above, the Court of Appeal upheld the trial judge’s decision that the preliminary construction schedule was a material component of Castlegar’s invitation to tender and, as such, Castlegar erred in forgiving Marwest’s non-compliance with that material requirement. The Court of Appeal further upheld that it was inappropriate to rely on Castelgar’s post-bid conduct to assess whether Marwest’s bid was compliant or whether Castlegar could properly exercise the discretion clause to forgive non-compliance. In other words, the time to assess compliance is at the time a bid is submitted. The Court of Appeal went on to affirm that the preliminary construction schedule was neither redundant nor useless.
Maglio Installations Ltd. v. Castlegar (City) is a helpful review of the law applying to invitations to tender and bids submitted in respect of same. Prudent bidders ought to ensure that their bids are compliant with all the requirements of invitations to tender and must carefully assess whether any non-compliance in their bids is in respect to any material requirements of the invitation to tender. A bidder submitted a non-compliant bid is submitting a bid that may be subject to outright rejection or even challenge by competing bidders on the basis that it does not comply with the material requirements of an invitation to tender.
Likewise, those soliciting bids on a project should carefully analyze what the material requirements of their project are, to draft their invitations to tender accordingly and to ensure that their consideration of any submitted bids follow a fair process that takes into account all material requirements of the invitation to bid. Any consideration of accepting non-compliant bids should only be done with careful consideration as to whether the non-compliance that may be forgiven is in respect of a material requirement or would potentially subject the soliciting party to legal challenge for their decision to accept a non-compliant bid.