In Procurement Law Basics Part 1, we covered the creation of
Contract A and Contract B in a simple tendering process. In this
Part 2, we start to look at one of the nuances that the courts have
developed in deciding the contents of Contract A - the bidding
In 1999, the Supreme Court of Canada decided the case of MJB
Enterprises Ltd. v. Defence Construction (1951) Ltd.
This again was a straight forward tender case. However, in this
case the tender price was partially comprised of unit prices.
Bidders had to provide a single price for material for fill, and
the owner had an option between two different types of fill that
could be used in the contract at the end of the day. Each of these
in practice would have a different cost, so bidders had to decide
whether to bid the highest cost, the lowest cost or some average
low cost, based on their experience. The lowest tender contained a
note next to its unit prices clarifying that the prices were based
on type 3 fill. The note clarified that if type 2 fill was required
in a certain area, then an additional $60.00 per metre should be
added to the price. Even at the higher price, this tender would
have been the lowest price. The owner therefore treated this as a
clarification to the tender and accepted it.
The SCC however held that the note was a qualification, making
the tender invalid and that the owner did not have the right to
accept an invalid tender. The tender document contained a clause
saying "the lowest or any tender shall not necessarily be
accepted". The owner claimed that this gave it the privilege
to accept any of the tenders, as it was clear that the lowest bid
would not necessarily win. The SCC held that this provision did not
go as far as the owner claimed.
The court pointed out that entering into a tender process can be
expensive for bidders and therefore created a degree of risk.
Bidders must prepare their tender document, put up the security and
spend time in the process, with no guarantee of being awarded a
contract at the end of the day. The court considered that no
reasonable person would wish to expose themselves to that risk, if
at the end of the day the owner had carte blanche to accept
non-compliant tenders. The SCC therefore implied a term into
Contract A that only a compliant bid would be accepted.
The privilege clause that the owner had relied on still had some
validity. It meant that the owner did not have to accept the lowest
tender price, but could take a "more nuanced view of cost than
the prices quoted in the tenders". For example, a tender with
a slightly higher cost might provide a faster completion date or
provide better value for money for the owner overall. However,
there was nothing in the use of the word "cost" to
suggest that the owner had the discretion to accept a non-compliant
In the next installment of this series, we will consider the
next clause implied into Contract A by the Supreme Court of Canada,
an obligation to treat bidders fairly and equally.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).