Looking for Tenders

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Timing is everything in bid bond disputes

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by Journal Of Commerce

Tender compliance should be assessed based on the state of the tender at the tender submission deadline. As illustrated by legal disputes involving faulty bonds, the tendering process does not typically permit owners to grant bidders the indulgence of making post-bid repairs to non-compliant tenders.
Paul Emanuelli
Paul Emanuelli

Bid Protest Bulletin | Paul Emaneulli

Tender compliance should be assessed based on the state of the tender at the tender submission deadline. As illustrated by legal disputes involving faulty bonds, the tendering process does not typically permit owners to grant bidders the indulgence of making post-bid repairs to non-compliant tenders.

By way of example, in its decision in Magna Contracting and Management Inc. v. Newfoundland, the Newfoundland Supreme Court considered a situation where the bidder failed to sign the bid bond that accompanied its tender.

Given the significance attached to the tender submission deadline, the court noted that tender compliance should be assessed based on the state of the tender at that specific time, rather than at a later time after the close of bidding:

...the Instructions to Bidders make it clear that tenders received after “the exact closing time and date indicated” will not be considered.

Further, amendments to tenders are permitted, but only up until, “Tender closing time.”

Bids may be withdrawn “prior to the time fixed for opening” which, according to the Invitation to Tender, will be “immediately after the tender closing time.”

These references, together with the unfairness that would result if a later undefined time were used — perhaps differing by tenderer — persuade me that it was an implied term of Contract A, between the Department of Public Works and the bidders, that the bids received would be assessed for completeness on the basis of the bid, as it stood as of the closing time and date.

While the actual assessment may of necessity take place later, what is being assessed is the bid as it stood as of the closing time and date.

The fact that the bond was later shown to be enforceable was insufficient to save the tender since the bidder had failed to submit enforceable bid security by closing time. As the court stated:

Here, the bond was delivered to the owner by the closing date. As of that date, it lacked the signature of the principal and was legally unenforceable against the surety. The fact that the surety, by agreement, later said that it would be bound by the bond does not change the fact that, as the bond stood as of the tender closing, it was unenforceable.

The court therefore concluded that the owner acted properly when it rejected the plaintiff’s tender due to non-compliance.

Similarly, the September 2002 decision of the Ontario Superior Court of Justice in Fullercon Ltd. v. Ottawa (City) involved a tender call that expressly called for a strict compliance standard for matters relating to financial security.

The successful bidder provided a copy of the required bonding agreement prior to close, but that bond was unsigned. While a subsequent affidavit confirmed that the original had been signed and sealed prior to close, the court held that the tender “did not, at that crucial time, demonstrably meet the tender requirements.”

By allowing the bidder to prove its compliance after the tender submission deadline, the owner found that the city permitted an improper post-close correction to a non-compliant tender. The court held that the reserved rights and privileges in the tender call did not permit the owner to waive such a major irregularity.

The acceptance of a non-compliant tender was found to be breach of the duty of fairness owed to compliant bidders.

As these cases illustrate, tender compliance must be considered based on the state of the tender at the tender submission deadline.

Tender non-compliance cannot be cured after the submission deadline and cannot be cured through contract performance. A non-compliant tender remains non-compliant even if the contractor later performs according to the originally specified standard.

Paul Emanuelli's procurement law practice focuses on all aspects of the tendering cycle including bid dispute resolution. This article is extracted from Emanuelli’s Government Procurement textbook published by LexisNexis Butterworths. Reach Paul at paul.emanuelli@procurementoffice.ca.

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