February 1, 2012

When low bidders sue over contracts

Bid Protest Bulletin | Paul Emanuelli

The legal defensibility of a low bid bypass decision will depend on the transparency of the factors relied on by the owner.

For example, in its decision in Tercon Contractors Ltd. v. British Columbia, the British Columbia Supreme Court held that preferences for factors other than price were acceptable, as long as those preferences were disclosed in the tender call.

The case involved a highway construction project on Vancouver Island.

The low bidder, who proposed using steel to build the bridge, was bypassed in favour of a higher bid due to the Ministry of Transportation and Highway’s undisclosed preference for concrete.

The low bidder sued, alleging that it should have been awarded the contract.

The court agreed, finding that the concrete preference should have been disclosed.

The court found that if the ministry preferred concrete even where that material was more expensive, then this preference “should have been quantified and the defendant ought to have informed all bidders that the concrete alternative would be preferred and by how much.”

The court found that the ministry’s failure to disclose this evaluation factor amounted to the use of a hidden preference, which “in effect incorporated an implied term with respect to its preference for concrete without giving notice to all bidders.”

This undisclosed preference for concrete resulted in an unfair advantage to the winning bidder.

The ministry appealed, but the decision was upheld by the British Columbia Court of Appeal.

The plaintiff was ultimately awarded more than $1 million in lost profit damages due to the ministry’s hidden evaluation preference.

In contrast, in its decision in W.I.B. Co. Construction v. Central Okanagan School District No. 23, the British Columbia Supreme Court found that the owner was entitled to bypass the low bidder, due to concerns with that bidder’s proposed site supervisor.

The case involved a tender call for the construction of a school.

The court agreed that it is improper to disqualify a low bidder due to undisclosed criteria:

An owner may not arbitrarily or capriciously refuse to award Contract B to the lowest bidder since this would undermine the bidding system that has been developed over the years.

It is quite improper for an owner to disqualify a bidder on criteria not disclosed in the Call for Tenders.

However, the court disagreed with the plaintiff’s assertion that the owner’s concerns over the proposed site supervisor constituted an improper hidden evaluation factor:

The defendants’ position is simply that the plaintiff’s proposed site supervision was so deficient that W.I.B. Co. was not a qualified bidder.

The defendants go on to say that this decision was not made on the basis of some undisclosed term, but rather from a concern about site supervision, which must have been evident to all bidders from the stipulation contained in the tendering documents that the name and resume of the proposed site superintendent had to be submitted with the bid.

Although the tender documents do not explicitly say so, it is reasonable to expect a bidder to recognize that the identity of the site superintendent would be an important factor in determining whether a bid was qualified.

This decision illustrates how an owner is entitled to depart from industry norms when making contract award decisions, so long as it discloses the additional evaluation criteria it will rely on and applies those criteria in a fair and objective fashion.

In the specific situation, the district’s request for information regarding the bidder’s proposed supervisor was found to be sufficient to negate any assertions of hidden criteria.

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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