Basic contractual principles provide that in order to have an offer capable of immediate acceptance there must be certainty of price. As a result, in a traditional tender process, price is an essential element of the tender. If an error is discovered after submission however, to what extent can a tender price be altered?
Often pricing schedules are complicated and in cases of fixed lump sum contracts, there can be many elements which make up the final price. With complicated pricing structures, it is not uncommon for there to be errors in the pricing information submitted which can impact (both positively and negatively) on the final lump sum price.
An issue that is often faced by owners is the extent to which corrections can be made to pricing schedules following the close of tenders when such errors are discovered. In Australia, as in other common law jurisdictions, the equitable doctrine of rectification may, subject to the tender conditions, permit a very limited amount of amendment in the face of a unilateral mistake in a submitted tender, for example, in the case of a clerical transcription or arithmetical error.
The recent Canadian case of Maystar General Contractors Inc v Newmarket (Town), 2009, ONCA 675 is an interesting exploration of the difference between a unilateral pricing mistake that is capable of rectification and one that is so fundamental that the tender is too uncertain for it to be accepted.
The town of Newmarket Ontario (the Town) issued a select tender to four pre-qualified contractors for the construction of a new recreational facility. Tenders were received from, amongst others, Maystar General Contractors Inc (Maystar) and Bondfield Construction Company (Bondfield).
At tender opening1, the Maystar tender was recorded as the lowest priced.
During tender evaluation2 it was noted by the tender evaluation committee that there was a discrepancy in the Bondfield bid price.
The price schedule in the invitation to tender document was constituted as follows:
stipulated price + GST amount = total cost of work.
Bondfield's pricing schedule was completed as follows:
|Element of Price||Amount|
|Total cost of work||$35,874,960.00^|
* This amount was not 7% of the stipulated price but 7% of a transposed higher figure of $33,528,000.00
^ This figure is the sum of the GST and the transposed higher figure of $33,528,000.00
As a result of the issues outlined above, the 'stipulated price' and GST amount did not equal the 'total cost of work'. The evaluation committee took the view that Bondfield had made an arithmetic or clerical error in its bid form. The GST figure was then recalculated based on the stipulated price and this figure was then used to determine what the committee believed to be the correct total cost of work. As a result of these amendments to Bondfield's price it was recommended that Bondfield be considered the lowest priced tenderer on the basis that the stipulated price was correct and represented the lowest bid price received by the Town.
The evaluation committee made a recommendation to the Director of Parks, Recreation and Culture suggesting that the Town request written confirmation from Bondfield that their stipulated price was in fact the correct bid price. Despite initial reservations by the Manager of Purchasing and Office Services regarding awarding the tender to Bondfield because of the price uncertainty, Town staff agreed to recommend to the Town Council that it accept Bondfield's tender.
Following a meeting by the evaluation team, the Manager of Purchasing and Office Services received a message from Bondfield on the price discrepancy issue. This message was followed by a faxed letter indicating that an addition error had occurred following last minute changes to the base price which were not carried over to the GST calculation and that the total cost of work was therefore incorrect (the Bondfield letter). The letter requested that the Town evaluate the tender on the basis of the stipulated price, which was lower than the Maystar bid price.
Following the meeting and the receipt of the letter from Bondfield, 'Unofficial Tender Results' were circulated to all bidders which noted that, following correction of the Bondfield figures by the Town, Bondfield was now the lowest priced bidder. The Town determined that it could correct the mistake made by Bondfield on the basis of a previous decision of Bradscot3. In Bradscot the summary price information was not consistent with the main pricing schedule. In that case, the total bid price was clear on the face of the document, the summary pricing information was determined to be superfluous and subordinate and further it was evident that there was a transcription error.
Following a complaint by Maystar in relation to this correction, the Town convened a special meeting. The meeting agenda included a copy of a report which recommended the Bondfield bid for the corrected amount. A copy of the Bondfield letter was also attached to the report as was a copy of the Maystar complaint letter.
At the meeting, the Town Council considered the report and also heard from Maystar as to its concerns. The Town Council passed a motion approving the awarding of the contract to Bondfield for the stipulated price.
First Instance Decision
The right to rectify a mistake
Maystar brought a claim at first instance for a breach of the process contract. At first instance the Court found that Bondfield's bid price was too uncertain relying on the decision of Vachon Construction4. Vachon held that price is an essential element of a bid and that an offer that is uncertain as to price cannot form the basis of a binding contractual relationship. In the Court's view Bondfield committed two errors in its pricing schedule. The first was in the GST calculation, and the second in the total cost of work calculation. These two errors made it impossible from a review of the bid form to tell where the error lay. Evidence was brought of internal Town discussions between Town staff which reflect different opinions as to which line item in the bid price was accurate.
Unlike the Bradscot decision, on which the Town relied, the Court found that the pricing schedule in which the two errors were made by Bradfield were neither superfluous nor subordinate information.
The Court held that the error could not be rectified by a simple arithmetic recalculation. The Court further noted that the tender conditions provided that amendments to bids following the close of tenders should not be considered or accepted. As a result the Town's consideration of the Bondfield letter which contained a clarification and requested an amendment was in breach of the tender conditions and constituted a breach of the Town's duty of fairness.
The right to accept a non-compliant tender
The Town argued that the tender conditions allowed it to accept a non-compliant tender. Specifically it relied on the following tender condition to support its position:
At first instance, the Court found that in the absence of clear and straightforward language in the tender conditions, an owner cannot accept a non-compliant bid, and that such language was not present in the Town's tender conditions.
As a result of the uncertain price, and on the basis that the tender conditions did not provide for the Town's acceptance of a non-compliant tender, the tender was not compliant and the Court at first instance determined that the Town should not have accepted the Bondfield bid. Maystar's application was therefore upheld.
On appeal the critical issues for the Court were:
- Was the bid price sufficiently certain such that the Bondfield tender was a compliant tender capable of acceptance?
- If the tender was deemed non-compliant, did the tender conditions permit the acceptance of a non-compliant bid?
Was the bid price sufficiently certain?
The appeal court found that the bid price was not sufficiently certain. On the face of the document, it was not possible to determine whether the stipulated price or the total cost of work was correct. The Court concurred with the first instance decision that this was not the same factual scenario as that in Bradscot. In Bradscot, unlike in this case, only a notional correction was made. Further, the Court determined that the Town had relied on the Bondfield letter to determine the price on which to base its decision.
As a result, the price was not sufficiently certain and the Court found that the Bondfield tender should have been declared non-compliant for failing to contain a certain price. Did the tender conditions allow the acceptance of a noncompliantbid?
The Town submitted that certain provisions in the tender conditions allowed the Town to accept Bondfield's noncompliant bid and that these provisions were not given due weight or accord by the Court at first instance.
The Town contended that the provisions allowed it to check all arithmetical extensions to ensure that they were correct, waive any discrepancies, errors or other defects or deficiencies in the tender schedules and determine whether a bid was substantially compliant and accept an unbalanced, irregular or informal bid.
The Court of Appeal found that the trial judge had considered the effect of the tender conditions. The Court found that the discrepancy in the Bondfield tender, and consequent uncertainty in the bid price, constituted a fundamental error that was not able to be unilaterally corrected or waived using any provision of the tenderconditions. It required an amendment to the tender to make all pricing information consistent with the stipulated price and in accordance with Bondfield's post closing date correspondence that identified the error and explained its intent. Acceptance of such amendment was specifically prohibited by the tender conditions.
The Court dismissed the Town's appeal with costs.
This case is an interesting exploration of the boundaries to the equitable doctrine of rectification in cases of unilateral mistake. It highlights the difference between correcting a clerical or arithmetical pricing error, which may be allowed, and a fundamental error which makes an offer so uncertain it is not capable of acceptance.
For those drafting invitation to tender documents, it serves as a useful reminder that tender conditions or bidding rules must be reviewed and drafted to ensure that they giveowners the widest discretion possible to accept compliant, non-compliant or substantially compliant bids in order to ensure that a value for money outcome can be achieved.
For tenderers this case is an important reminder to ensure that pricing information is correct at the time of submission, as it is likely that correction following the closing date will only be permitted in limited circumstances, if at all.
1. In accordance with the relevant tender opening
procedures, tenders were opened in public and the bid prices were
announced at that time.
2. It can be assumed from the facts presented in the judgment that the tender was to be awarded to the lowest priced tenderer, subject to a satisfactory commercial and technical response
3. (MCL) Ltd. v. Hamilton-Wentworth Catholic District Board (1999), 42 0.r. (3d) 723 (C.A.)
4. Ltd. v Cariboo (Regional District)  B.C.J. No. 1409 (C.A.)
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