Recently, there was a BC Supreme Court decision that dealt with the consequences of accepting a non-compliant bid. The judge also had some stern warnings for the parties about undermining the integrity of the tendering process when parties do not follow the rules.
In Cranbrook Interior Woodwork Ltd. v. D & T Developments Ltd., Cranbrook Interior Woodwork Ltd. (“Cranbrook”) submitted the lowest bid for the subcontract to supply and install architectural woodwork.
The tender was being conducted pursuant to the British Columbia Construction Association’s Bid Depository Rules of Procedure (the “Rules”). The Bid Depository is a system set up for general contractors to receive bids from trade subcontractors from which the general contractor then prepares its own bid.
The Rules provided in part that:
- Bidders are not compelled to quote the same price to all General Contractors.
- When a bidder missed bidding to a General Contractor for reasons that could not have been reasonably anticipated, they can submit their bid within one working day after the bid depository closing.
- A General Contractor shall select one bid addressed to him, but need not accept the lowest bid received.
- The General Contractor cannot accept alterations, amendments, or clarifications that have the effect of altering or amending a bid.
- If a bidder contravenes the Rules, the bid may be disqualified. A disqualified bid is ineligible for use by the General Contractor.
D&T Developments Ltd. (“D&T”) was the general contractor that was ultimately awarded the head contract. While Cranbrook was the low bidder at $234,858, D&T did not award the subcontract to Cranbrook. Instead, D&T awarded the subcontract to Lortap Enterprises Ltd. (“Lortap”) who submitted a bid of $248,600, but who had verbally reduced its price by $10,000.
Cranbrook sued for D&T for damages, arguing that Lortap’s bid was non-compliant with the Rules and could not be accepted.
D&T argued that it was not required to accept the lowest bid according to the Rules and that Cranbrook’s bid was not compliant in any event.
Was either bid compliant and capable of being accepted?
The Court found that the Rules required the bids to be in writing. As such, Lortap’s verbal discount did not follow the Rules and made Lortap’s bid non-compliant. In awarding the construction contract (contract B) to Lortap, the D&T breached its bid contract (contract A) obligations to Cranbrook and the other bidders that it would only accept a compliant bid.
However, the Court also found that Cranbrook’s bid was non-compliant. Pursuant to the Rules, the bids had to be submitted by 3:00 pm. However, bidders had 24 hours after closing to submit their bid to a particular General Contractor if they had missed bidding for reasons that could not have been reasonably anticipated. In this case, the Court found that Cranbrook made a calculated decision not to submit a bid to D&T prior to the closing because it did not receive assurances from D&T that it would be accepted if it were the low bidder. While Cranbrook submitted its bid to D&T within 24 hours after closing, the Court found that it was not late because of “an unanticipated reason”. As such, Cranbrook’s bid was non-compliant and the Court found that Cranbrook could not complain that D&T had contracted with some other party.
At the end of the Court’s written decision, the Court had some stern comments for both parties, which are noteworthy to all parties that participate in formal tenders. The Court noted that there was conflicting evidence between the parties about conversations that had occurred throughout the tender process between Cranbrook and D&T, saying:
Both versions of the conversations are troubling and show intent by both parties to manipulate the tender process to their respective advantage. At a minimum, [Cranbrook] was attempting to obtain assurances that his bid would be accepted, when the Rules made clear that the lowest bid need not be accepted. [D&T] was demanding Cranbrook’s lowest price when the Rules allowed different bids to different parties. In addition, [D&T] admits leaking to [Cranbrook] Lortap’s bid in advance of receiving Cranbrook’s bid. Such conduct strikes at the heart of the tendering system and undermines its integrity.
At the end of the day, nobody won. Cranbrook’s claim for damages was dismissed and D&T was not awarded court costs due to their conduct.
- Don’t complain about who was awarded the construction contract if your own bid was not compliant.
- Follow the rules of the process as set out in the invitation to tender documents and any other bid depository rules that may be applicable.
- If you don’t follow the rules, you do so at your own peril.
This article was written by Ian Moes, a lawyer who practices in construction law with the law firm of Kuhn LLP. This article is only intended as a guide and cannot cover every situation. It is important to get legal advice for specific situations. If you have any questions or comments about this case or other construction law matters, please contact us at 604-864-8877