By Paul Emanuelli

This article is an excerpt from Government Procurement, which is available for purchase.

In its July 2014 decision in Cobalt Construction v. Kluane First Nation, the Yukon Territory Supreme Court proceeded by way of summary trial and found Kluane First Nation (“KFN”) liable for awarding a contract to a non-compliant bidder. The case dealt with a tender call for road upgrades in Burwash Landing. KFN awarded the contract to a bidder who failed to submit the required bid security with its bid. Cobalt Construction, a competing bidder, launched a lawsuit to challenge the award, alleging that it should have been awarded the contract as the lowest compliant bidder and claiming lost profits as compensation.

KFN attempted to defend against the claim by asserting the Cobalt Construction’s bid was non-compliant and ineligible for award and that Cobalt was therefore not entitled to any lost profits. The court rejected this defence, finding that Cobalt’s bid was compliant. The Court went further and found that the selected bidder’s bid was in fact non-compliant due to its failure to include the required bid bond, and that KFN had therefore made an improper contract award:

16 Kluane Corp.’s bid was submitted to KFN before the bid closing time, which was 4:30 PM, July 3, 2013. However, it did not include a bid bond or other form of bid security. After closing time, KFN asked for and permitted Kluane Corp. to submit bid security, which it did on July 5, 2013. None of this is contested by KFN.

The court found that KFN breached the duty of fairness owed to other bidders by accepting a non-compliant bid and that the contract should have been awarded to Cobalt Construction, and ordered KFN to pay Cobalt Construction $318,251.00 in lost profits. As this case illustrates, the failure to reject non-compliant bids remains a high-risk decision in fixed-bid tendering.