Procurement Laws
BORDEN LADNER GERVAIS
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Mar 15, 2012

It’s the moment every bidder dreads – the discovery of a mistake in the irrevocable tender price they have just submitted that could greatly reduce or completely eliminate any profit they had hoped to realize if awarded the contract.

In that panicked moment of discovery, a bidder’s mind feverishly considers every conceivable option to avoid being held to that bid price. Chief among these options will be a formal request to withdraw the bid, yet the majority of RFPs expressly prohibit withdrawal after bid-closing.

Even if a bidder refuses to honour their flawed bid price, they may still be on the hook for the difference between the price submitted and the next lowest bid price – effectively paying a prospective client to do business with a competitor – a result as humiliating as it is costly.

What, then, are your options? If luck is on your side, the price mistake will be patently obvious. When this happens, a Court may allow the bidder to walk away from the procurement without having to perform the contract or pay compensation.

In other cases, a bidder might be able to claim its bid was non-compliant. Courts sometimes allow bidders to avoid having to perform the work for the flawed price, but only if it is clear that their bid was non-compliant on a mandatory requirement.

In one case, Graham Industrial Services Ltd v. Greater Vancouver Water District, the best-priced bidder realized that it made a $2,000,000 mathematical error. When the contract authority refused to allow it to withdraw its bid, the bidder claimed its bid couldn’t be accepted as it was materially non-compliant. The B.C. Court of Appeal agreed.

Such “exit ramps” are not always available, and this type of defence should only be asserted when all other legal avenues are closed off.

The recent case of Manitoba Eastern Star Chalet Inc. v. Dominion Construction Co. Inc., from the Manitoba Court of Queen’s Bench, dem­onstrates this perilous area of procurement law.

Dominion responded to an RFP for construction services. After the evaluation of proposals, Dominion was advised it was the low bid. In any other context, it would have been the best possible result – but Dominion’s low bid price was the result of a mathematical error caused by the type of computer software it had used to estimate costs. The error, while substantial, was not obvious on the face of the bid. Visit blg.com/defence-article for the full story.

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Jack Hughes is the National Leader of Borden Ladner Gervais’ Defence and Security Industry Group and primarily practices in the areas of government relations and government procurement law.
He can be reached at jhughes@blg.com.
© FrontLine Defence 2012

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