Since the decision of the Supreme Court of Canada in R.
v. Ron Engineering and Construction (Eastern) Ltd.,
 1 S.C.R. 111 defined the "Contract A / Contract B"
analysis for bidding and tendering construction projects, the
courts have struggled with how "Contract A" is
formed. "Contract A" is, of course, the legal
relationship between the proponent of a project and the bidders on
the tender issued by the proponent. In the Ron
Engineering analysis, Contract A is the "bidding
contract" which is an offer that is accepted via compliance by
the successful bidder with the instructions to the bidders, which
allows the successful bidder to enter in to Contract B.
Contract B is the "construction contract" to build the
In 1999, the Supreme Court of Canada released its decision in
M.J.B. Enterprises Ltd. v. Defence Construction (1951)
Ltd.,  1 S.C.R. 619, which confirmed that a bid in
response to a request for tender must be compliant with the
tendering documents to be accepted. A bid cannot be
accepted if it is non-compliant with the tender. If the
proponent of a project accepts a bid that is non-compliant with the
tender, the proponent may be sued for damages by a bidder that was
Since 1999, various courts have opined on what
"compliance" really means. The Supreme Court of
Canada itself revisited "compliance" in Double N
Earthmovers v. Edmonton (City),  1 S.C.R. 116. In
Double N, the four-member minority of the Court stated
that "substantial compliance" was required:
The test for compliance in the tendering process is
"substantial" rather than strict. Estey, J.'s
remark in Ron Engineering that it would be "anomalous
indeed if the march forward to a construction contract could be
halted by a simple omission" (p. 127) is often cited in
support for the substantial compliance test. ... Although Estey, J.
made this remark in reference to the Contract B stage, there is no
doubt that these same considerations apply to the Contract A stage
as well. It would make tendering unworkable if an owner and
the bidder were prevented from entering into contract based on an
Substantial compliance requires that all material conditions of
a tender, determined on an objective standard, be complied with
Last fall, the Newfoundland Court of Appeal was faced with an
appeal concerning the meaning of "substantial
compliance". In Cougar Engineering and Construction
v. Newfoundland and Labrador, 2015 NLCA 45, Cougar Engineering
sued the province for accepting what it claimed was a non-compliant
bid. What had occurred was that the schedule of quantities and
prices (or "SQP") form that was issued with the Tender
Specifications included the following specifications for pipe
1, 600 mm
2, 900 mm dia
3, 1050 mm
The project manager for the province thought that the commas in
the SQP form were confusing and could have resulted, for example,
in a bidder including a bid using 1,600 mm pipe instead of 600 mm
pipe, which was intended. In order to mitigate confusion, the
project manager replaced the SQP form with a revised SQP form that
used periods instead of commas. The revised SQP form was included
in Addendum 1 to the Tender Specifications.
Trouble arose when the successful bidder used the original SQP
form (with the commas) for its bid. Cougar, the second lowest
bidder used the proper revised SQP form (with the periods).
Cougar then sued the province for accepting a bid that did not
comply strictly with the Tender Specifications as amended.
In other cases, courts have concluded that the use of a form
other than the correct one can make a bid non-compliant: see, for
example Steelmac Ltd. v. Nova Scotia (Attorney General)
(2007) 61 C.L.R. (3d) 280 (N.S.S.C.), where a bid was submitted on
a non-prescribed form that did not have the written assurances on
the prescribed form that the court found were material; and
Eastern Regional Health Authority v. Kannegiessar Canada
Inc. (2015) Nfld. & P.E.I.R. 241 (Nfld. S.C.) where the
bidder included a qualification on the prescribed form that the
court held to be a non-compliant counter-offer.
The trial judge in Cougar found that the use of the
original (wrong) SQP form was not material and was simply an
irregularity that did not affect the quantities or prices of the
pipes to be supplied. The use of the wrong form, in this
case, was not unfair to the other, unsuccessful bidders including
the plaintiff, Cougar. Common sense prevailed, and the
Newfoundland and Labrador Court of Appeal applied Ron
Engineering and Double N and dismissed the
As the Cougar case illustrates, the key to the
compliance analysis is unfairness to the other bidders. While
Cougar was technically correct that the form submitted by the
successful bidder was not the correct one, it failed to prove that
any unfairness either resulted or, importantly, could have
resulted from the use of the wrong form. In application,
compliance really means: Was it fair for everyone who bid? A
bidder's mistake will not automatically disqualify the bidder
unless the mistake results in at least some kind of theoretical
unfairness to the other bidders.
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.
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