An almost overwhelming amount of Canadian jurisprudence and academic commentary in the past 30 years has canvassed a project owner's duties to bidders during the course of a tender process and the obligations and potential liabilities triggered upon the submission of a tender bid, from the landmark 1981 Supreme Court of Canada decision of R. v. Ron Engineering & Construction (Eastern) Ltd.1 to the deluge of case law and other analysis that has followed and expanded on it. In comparison, there has been significantly less discussion, both judicial and otherwise, about the duties and liabilities of the consultant in the tendering process, the architect or engineer hired by the owner to prepare tender packages, administer the bidding process and, in some cases, make recommendations to the owner regarding the preferred bidder. However, this relative lack of attention is not an indication that consultants are any less at risk of bearing legal liability for negligent acts or omissions in the tendering phase of a project.
The Canadian Law of Architecture & Engineering, 2nd ed., sets out the generally-accepted professional standard of care for a consultant working on a construction project:
Unless expressly stated in the contract for professional services, in all the work done for the client, the architect or engineer owes a duty to exercise the skill, care, diligence which may reasonably be expected of a person of ordinary competence, measured by the professional standard of the time.
...[A]rchitects or engineers are not obliged to perform to the standards of the most competent and qualified members of the profession, unless they so covenant. Unless they undertake to exercise a higher standard of care, what is required of architects or engineers is reasonable skill, care and diligence as judged generally by standards of competence in the profession in which they practice.... [Further], architects and engineers do not guarantee that their work will be successful. Provided that they have exercised reasonable judgment, competence and diligence in doing the work, the fact that the work proves unsatisfactory in some way will not render them liable to the client for breach of contract or negligence.2
Consultants can be held liable to the project owner and others for a failure to perform their professional obligations in accordance with this standard of care. In the context of the tender process, this requires the consultant to operate within the guidelines and framework of the process and to ensure that the documents prepared as part of the tender packages convey sufficient and accurate information to support a tender bid. The consultant controls and disperses the essential project information upon which bids are based, and as such, it is under a duty to ensure that such information is accurate, is free from material errors and is properly handled. The impact of this duty was discussed in the 1984 Ontario High Court of Justice case of Cardinal Construction Ltd. v. Brockville (Municipality)3, where, after a review of tender documentation prepared by the project consultant that conveyed an incorrect representation of the existing conditions at the project site and thereby misled bidders as to the scope of work necessary to complete the project, the Court stated as a general rule that "a bidder is entitled and expected to rely on the tender documents as conveying the best information the engineer can give"4. Consultants must carefully prepare tender packages keeping in mind the average bidder, not the bidder who has special knowledge and experience, and "it is not good enough...to provide information that is misleading, incomplete or inaccurate with the intention that the more experienced or knowledgeable bidder will ferret out the problems from 'clues'. The information should be clear and intelligible to all bidders"5. The engineer that prepares bid documents owes a duty of care to bidders that are known to rely on the information contained in such documents and must ensure that the information presented reflects with reasonable accuracy the nature of the work.6
In addition to its obligations relating to the preparation of tender documents, the consultant can also attract liability for negligent or improper acts and omissions during the course of bid solicitation and selection. A recent British Columbia decision, Stanco Projects Ltd. v. British Columbia (Ministry of Water, Land & Air Protection)7, canvasses both of these areas of potential liability in detail and provides an excellent example of the pitfalls that a consultant can face in a tendering dispute. In Stanco, Aplin & Martin, the project engineer, prepared a tender package for the owner Ministry seeking bids for the construction of two reservoirs known as the Alpine tank and the Nordic tank. Aplin & Martin signed a service contract with the Ministry agreeing to perform engineering work in accordance with the professional standard of care and to indemnify the Ministry for any loss or damage arising out of its acts or omissions.
The tender documents prepared by Aplin & Martin requested a breakdown of the individual bid prices for each tank, with such prices based on the use of glass fused to steel to construct the tanks. The documents also requested the level of global price savings that would be achieved if the tanks were constructed out of cheaper materials -- namely, epoxy-coated steel -- and they further stated that the Ministry might decide to construct one but not both tanks. However, the bid documents did not seek individual price breakdowns for the Alpine tank separate from the Nordic tank based on the possible use of the cheaper epoxy-coated steel (despite doing so for the use of glass fused to steel). After the bid process was complete, Stanco Projects was the low bidder on the combined package of the two tanks in both glass fused to steel and epoxy; another contractor, Westport, was the second lowest bidder.
Shortly after the tenders were opened, the Ministry decided that it would be proceeding with the construction of only the Alpine tank and that it would be using the cheaper epoxy. At this point, it became apparent that Aplin & Martin's tender documents did not request a separate price for each tank in epoxy. Aplin & Martin therefore contacted Stanco, the low bidder, and requested a price for the Alpine tank in epoxy. However, it then contacted both Westport and another bidder, Tritech, and requested the same additional price information, later representing to Stanco that it had spoken to no other bidders in this regard. Westport, aware of Stanco's prior pricing from the opened tenders, presented Aplin & Martin with a significantly lower price for the epoxy Alpine tank than its earlier tender price for both tanks in epoxy (based on a pro rata analysis of the work involved in each bid). Stanco's quoted price for the single tank was higher than Westport's. After unsuccessful attempts to get Stanco to lower its price, Aplin & Martin recommended that the Ministry award the construction contract to Westport and the Ministry did so. Stanco sued the Ministry for breach of the tender contract, arguing that, as the low compliant bidder in a formal tendering process, it was entitled to be awarded the reservoir construction work. The Ministry defended the action, but also added Aplin & Martin as a third party, claiming that any loss suffered by Stanco was as a result of the consultant's breaches of the service contract and its duty of care.
Both the British Columbia Supreme Court in 2004 and the British Columbia Court of Appeal in 2006 agreed that the post-tender solicitation of prices for the single Alpine tank in epoxy resulted in Stanco's low tender bid for both tanks being used as a bargaining tool in order for the Ministry to obtain a better price on the single tank. The courts thus held the Ministry liable for breach of the tendering Contract A. However, they disagreed about the Ministry's third party claim for indemnity from the consultant. The British Columbia Supreme Court held that, while Aplin & Martin's post-tender pricing communications with bidders other than Stanco was "plainly wrong"8 and amounted to a breach of its duty of care, it concluded that the Ministry, an experienced party in tendering, was sufficiently informed by Aplin & Martin of what had transpired and had evaluated the situation independently, thereby superseding the impact of the consultant's breach and eliminating the causal link between Aplin's breach and Stanco's resulting loss.
The Court of Appeal overturned the portion of the lower court's decision relating to Aplin & Martin's liability and made a strong statement about a consultant's contractual and tortious responsibility for its improper and negligent actions in the tendering process. The Court first confirmed that Aplin & Martin was "bound by contract and by tort law to provide advice to a standard of 'care, skill and diligence' reasonably expected of professional engineering consultants."9 It then set out the various errors that Aplin had committed in its dealings with bidders and the Ministry, including failing to require a separate price for each tank in epoxy in the tender documents and proceeding to contact Westport and Tritech for such a price after realizing this oversight once bids were opened. "These initial errors clearly led, in my view, to the unravelling of the entire bid process"10 -- a process that Aplin & Martin, as consultant, was obliged to administer. Turning to the Supreme Court's conclusion that these errors did not directly or indirectly lead to the loss or damage that resulted from the Ministry's decision to award the construction contract to Westport, the Court of Appeal strongly disagreed:
In our view, this reasoning ignores the fact that it was Aplin's negligence that placed the Ministry in the situation in which it was presented with a choice between the two prices and, not surprisingly, chose the cheaper one. If Aplin had written the bid so as to elicit a separate price for an epoxy-coated tank, if [Aplin's representative] Mr. Casidy had not contacted Westport and Tritech after telling [the Ministry] he would contact Stanco, if he had not asked Stanco to reconsider its revised price...and if Mr. Casidy had not misspoken to [Stanco] about his communication with other bidders, the Ministry's situation would have been very different in mid-July. Indeed, it is difficult not to conclude that the bid process would have proceeded without incident and that the Ministry would simply have chosen the best bid without further discussion, avoiding all the post-tender activity that ultimately led the trial judge to conclude that the duty of fairness owed by the Ministry to Stanco was breached.11
Therefore, even though it was ultimately the Ministry's decision to award the construction contract to Westport and not to Stanco, "Aplin contributed materially to the breach of the duty of fairness owed by the Ministry to Stanco. The Ministry's decision was the culminating event of the process -- but not the only contributing cause. Contrary to the trial judge's suggestion, the Ministry's expertise concerning the tendering process should not operate to shield the consultant from its share of responsibility in the matter."12 In this case, since Aplin had signed a service contract with the Ministry agreeing to indemnify it for any and all losses arising out of Aplin's negligence, the Court ultimately found that Aplin was liable to reimburse the Ministry for the full amount of the damages awarded to Stanco and payable by the Ministry in the action.
The British Columbia Court of Appeal's discussion of a consultant's duties and liabilities in preparing and administering the tendering process in Stanco Projects has not yet been subsequently considered in Alberta, but it is a clear warning to architects and engineers in the province who are engaged in bidding projects that liability for breaches of tender process obligations will not always begin and end with the project owner. Conversely, it is a notice to owners facing potential claims from disgruntled bidders that, in the right factual circumstances, they may have access to a source of contribution and indemnity for any damage award that may ultimately be awarded against them as a result of a tendering dispute.
Footnotes
1. R. v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111, 119 D.L.R. (3d) 267.
2. B.M. McLachlin, W.J. Wallace & A.M. Grant, The Canadian Law of Architecture & Engineering, 2nd ed. (Toronto: Butterworths, 1994) at 101-02.
3. Cardinal Construction Ltd. v. Brockville (Municipality) (1984), 4 C.L.R. 149, 1984 CarswellOnt 517 (H.C.J.).
4. Ibid. at para. 54.
5. Ibid.
6. Paul Sandori & William M. Pigott, Bidding and Tendering: What Is The Law?, 3rd ed. (Markham: LexisNexis Canada Inc., 2004) at 184.
7. Stanco Projects Ltd. v. British Columbia (Ministry of Water, Land & Air Protection), 2004 BCSC 1038, 32 B.C.L.R. (4th) 302, reversed in part by 2006 BCCA 246, 53 B.C.L.R. (4th) 16.
8. Ibid. at para. 153 (BCSC).
9. Ibid. at para. 67 (BCCA).
10. Ibid. at para. 69.
11. Ibid. at para. 74.
12. Ibid. at para. 76.
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