Looking for Tenders

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Industry Voices: Looking at the importance of best tendering practices

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by Mark MacEwing

In its seminal decision in R. v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111, the Supreme Court of Canada determined that the tendering method of contract procurement involves two stages of contractual relationships:
Industry Voices: Looking at the importance of best tendering practices

Contract A, which exists between the party which issues the tender documents ("the tendering authority") and each compliant tenderer, and the terms of which are set out in the tender documents; and

Contract B, which is the construction contract entered into by the tendering authority and the successful tenderer.

Because the tendering process itself gives rise to contractual rights and responsibilities, and particularly because tender documents are often not prepared by lawyers, close attention should be given to ensuring that they are drafted, reviewed and followed with as much care as the construction contract or any other legal document.

Issues arising from the tendering process generally, and tender documents in particular, expose tendering authorities and tendering contractors and subcontractors differently to the risks of uncertain results and liability for breach of contract.

The following are some common problems which should be avoided when possible:

Counter-productive tendering practices, such as imposing unreasonably onerous privilege clauses, incorporating unnecessarily complicated tender procedures and mixing tendering with negotiation;

Poorly drafted tender documents, which contain inconsistent provisions, unclear or ungrammatical wording, inadequately worded privilege clauses or provisions which relate to the construction rather than its procurement and therefore properly belong in the construction contract rather than in the tender documents;

Careless approach to the tendering process, including lack of general knowledge of tendering law and failure to understand and follow the procedures prescribed by the tender documents.

For tendering authorities and their architects and engineers, who typically prepare tender documents, the above issues can give rise to increased tender prices, uncertainty as to successful maximization of flexibility in accepting or rejecting tenders and potential liability for the lost profit of wrongly rejected tenderers.

Recognition of those issues as they apply to tenderers suggests that contractors and subcontractors should apply the following best practices in order to minimize potential economic risk and legal liability arising from their participation in tendering processes:

Have a basic knowledge of tendering law. Recognize the legal "rules of the game" which apply to this unique procurement method.

Read carefully and understand the totality of the tender documents. Be aware of your potential contractual rights and responsibilities arising from participation in a tender process.

Clarify any pre-bid uncertainties, utilizing the prescribed process for requesting additional information, and carry out exhaustive reviews of takeoffs, estimates and calculations.

A mistake in the preparation of an irrevocable tender only in certain circumstances allows the tenderer to avoid the possibility of the tender authority's binding acceptance of the tender. Acceptance of a mistakenly priced bid can have disastrous results for the tenderer, either by having to perform a contract without a profit or at a loss or incurring liability for refusing to perform valued as the difference between the mistaken and the next lowest bid.

Comply with all tender requirements. Despite privilege clauses which entitle tendering authorities to waive tender "irregularities", only fully compliant tenderers can be confident that they may not be rejected simply for shortcomings in their tender submission.

My colleagues and I will be addressing these and other issues and concerns in the Tendering and Procurement: Best Practices session at Buildex Vancouver  on Feb. 26.

J. Marc MacEwing is associate counsel at Shapiro Hankinson & Knutson Law Corporation. Send comments to editor@journalofcommerce.com.

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