I am always asked the question at speaking events of the extent to which a contracting authority may consider a trade’s reputation and prior record of dealing with a low bidder. The question is usually about how much consideration was given to all the other factors, other than just the lowest price of the tender.
For example, In the British Columbia Court of Appeal in “Continental Steel Ltd. v. Mierau Constructors Ltd”. In that case, there was no dispute that the plaintiff had the necessary qualifications and experience to perform the steel subcontract and met all the requirements for its qualification as a bidder, including a bid bond. However, the defendant’s estimator testified that the plaintiff’s bid was rejected for reasons to do with reputation and prior experience.
The estimator concluded delays resulting from possible problems with the plaintiff would render its bid of $233,771 higher in the long run than the next lowest bid of $239,000. In giving the judgement of the Court of Appeal, Low J.A stated:
“In the present case, the appellant did not choose between the two lowest bids on the basis of an undisclosed criterion. From the tender documents each bidder knew what it had to know in order to make an informed bid. There was no hidden formula for preference of one bid over the other. Once the bids were in the appellant had to make a business decision and in so doing it had to be fair to all bidders. On the one hand, it could not be arbitrary. But, on the other hand, the appellant was not obligated to blindly accept the lowest bid. It was entitled to act in its own best financial interests so long as its decision was not unfair to any Bidder.”
In another case, West Central Air Ltd. v, Saskatchewan, the appellant was the low but unsuccessful bidder for a government tendering spruce budworm aerial spraying program. The tender included a general privilege clause that provided that the lowest bid might not be accepted. The respondent had concerns with respect to the reliability and suitability of the appellant’s aircraft and the appellant’s inexperience in forestry projects and awarded the contract to the higher bidder.
The appellant commenced this action for breach of contract on the basis that its tender was not properly or lawfully dealt with because the respondent failed in its obligation to consider the tender fairly and in good faith. The trial judge dismissed the action.
On appeal. It was held that while under the general privilege clause the lowest bid did not need to be accepted, the respondent had the obligation to consider the tender in good faith. This required it to assess all tenders fairly and equally.
The respondent acted in good faith but the appellant was not treated fairly based on the issue of how the aircraft was handled. The West Central Air case illustrates that where a contracting authority wishes to exclude a bidder due to concerns with respect to the technical or professional competence of the bidder, its staff or the capability of its equipment, it is essential that these concerns be based upon rational assessment of credible information. Ideally, information should be systematically compiled, and a proper comparison should be made of the corresponding qualifications and capabilities of other suppliers.
A failure to adopt a rigorous approach to such assessment may result in liability and informal methods of assessing the capability to perform with risk. The West Central Air case also underscores the serious risk arising from the use of informal references, that are not properly documented. It is unwise to rely upon references that are not in writing, in view of the difficulty of providing what was actually said should a dispute arise.
Stephen Bauld is a government procurement expert and can be reached at [email protected]
Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.