Bid shopping can inadvertently happen in any organization,
regardless of the industry sector. That's what happened
in a recent case involving a smaller municipality in Nova
Scotia. In the recent case of The Town of Port Hawskesbury
v. Borcherdt Concrete Products Limited (decided in
February 2008), the lowest bid exceeded the
municipality's budget. The Town decided to do some of
the work with its own forces. It seemed a practical and
reasonable way to come in on budget.
The project involved the construction of bleachers for an
arena that was part of a new civic centre worth $15 million.
The Town's planned budget for the manufacture, delivery
and installation of the arena bleachers was $169,092. Borcherdt
Concrete, the plaintiff in the lower court and the only bidder,
submitted a bid for $269,000. As soon as the bids closed, the
Town scurried to find ways to install the bleachers at a price
that fit within its budget. It solicited a quote from a third
party for the supply of the bleachers and it decided to act as
its own general contractor and have its staff install some of
the bleachers. The Town finally informed Borcherdt Concrete
that its bid had not been accepted. Borcherdt Concrete sued the
Town alleging breach of contract and breach of an implied term
of good faith and fairness in the tendering process.
Shop That Bid
Mr. Justice Scanlan found the Town in breach of its duty to
ensure fair treatment of the only bid received. He said the
process followed by the Town amounted to bid shopping, that by
having its own forces perform the installation of the
bleachers, the Town had awarded part of the work to a
non-compliant bidder itself. The court endorsed the expansive
definition of bid shopping adopted by earlier courts as
"... conduct where a tendering authority uses the bids
submitted to it as a negotiating tool, whether expressly or in
a more clandestine way, before the construction contract has
been awarded, with a view to obtain a better price or other
contractual advantage from that particular tenderer or any of
the others...." The trial judge awarded damages to
Borcherdt Concrete in the amount of $68,536.
The Town argued that the privilege clause allowed it
"to reject any and all tenders that, in its sole
discretion, are not in the interest of the Town." In yet
another case where the courts narrowly interpret the language
of the privilege clause, the trial court explained how the
"issues in this case go well beyond the rights afforded to
the defendant [the Town] by the privilege clause." It
added that the privilege clause "does not give unfettered
discretion to simply disregard the rights and interests of the
plaintiff in the tender process." The court dismissed the
Town's plea about the futility of formally terminating
the process with Borcherdt Concrete. By not formally
terminating the process, the trial judge found that Contract A
was still alive so the Town was under a duty to treat Borcherdt
The Court Of Appeal
The Nova Scotia Court of Appeal accepted the lower
court's finding of facts and application of the law,
but it reduced Borcherdt Concrete's damages award from
$68,536 to $44,548, on the basis that Borcherdt Concrete would
not have been awarded Contract B (the contract for the
The decision in The Town of Port Hawskesbury
illustrates the importance of working with a well-drafted
tender call document. As the Court of Appeal noted, there was
nothing in the Town's tender documents that allowed it
to renegotiate the scope of the work with a third party. The
case also highlights the value of having a legal framework that
is clearly defined within the tender call document to avoid
having residual legal and fairness obligations restrict the
margin of flexibility of a buyer at the end of the procurement
process. Bid shopping can indeed happen to any organization,
including those in the healthcare sector, but it can easily be
avoided with a little knowledge and some careful drafting.
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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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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