This article is an extract from the 5th edition of Government Procurement.
In its May 2018 decision in Coady Construction & Excavating Limited v. Town of Conception Bay South, the Supreme Court of Newfoundland and Labrador found a municipality liable for lost profit damages after finding that it awarded a contract to a non-compliant bidder. The case dealt with a tendering process for the award of a sewer work contract. In addition to seeking pricing for the specified requirements, the tender call asked bidders to submit pricing for non-evaluated items that were outside the design requirements, but could be required later under future scope changes. While the low bidder left the pricing for the non-evaluated manhole cover item blank, the Town of Conception Bay South deemed this to be an immaterial omission and awarded the contract to the low bidder. The next lowest bidder sued, arguing that the low bidder should have been disqualified, claiming that it should be awarded lost profits due to the unfair evaluation process.
The Town took the position that the low bid was compliant and capable of acceptance since the omission was immaterial, but the Court found otherwise after considering the testimony of the municipality’s witness:
While the Town asserts that the failure to include the unit price was of no consequence to the bid order, Mr. Manual indicated that he was sufficiently concerned about the omission to seek direction from the Department of Municipal Affairs and was hesitant to accept responsibility for the decision to approve the lowest bid. Accordingly, despite the Town’s assertion that the absence of a unit price for 02601 Quantity Item did not affect the order of the bids, the evidence of Mr. Manual did not support that position. His evidence clarified that the omission of a price could have implications for the work to be performed if the item noted was subsequently required.
The Court found that the omission was material, as the lack of pricing left the Town exposed to unknown costs should that item be later required for the project. The Court also found it was unfair to accept the low bid since other bidders had provided pricing for the item and were bound to that pricing while the low bidder was not:
The Town’s position that the failure to include a unit price for an item identified as zero quantity did not affect the bids received is not supported by the evidence. Mr. Manual, its own engineering consultant, deposed that had further excavation required the use of the item identified at zero quantity, the price would have been negotiated at that time or it would be considered a “cost plus process to determine the unit price” item. It was not disputed that the 4M to 4.5M Pre-Cast Manholes could be necessary as the contracted underground work progressed. The majority of the other bidders included the price for that item. It is not akin to an irregularity or omission involving an item that was of no consequence to the work in question. There was no evidence presented to the Court in this proceeding to establish that the 4M to 4.5M Pre-Cast Manhole was a frivolous addition with no relation to the contract bid. Had the item been needed, the Town would have to pay an additional price agreed upon either through negotiation or cost plus.
The benefit for the Town flowing from the insertion of cost for this item is that the successful bidder could be held to its contractual commitment. It also underscores the principle that all bidders be treated fairly. The incomplete bid not only could impact the price of the contract, it also did impact the ability of the engineering consultant to “fairly determine whether the tender call had been complied with” (Adams, J. in R.J.G. at para. 20). The Town failed to establish that the failure to include a price for the 4M to 4.5M Pre-Cast Manholes was in relation to something that did not impact on the ultimate price of the contract. Other bidders would be bound by the price but the successful bidder was not.
The Court therefore determined that the Town breached the tendering process rules by accepting a materially non-compliant bid and awarded the plaintiff lost profits damages.
As this case illustrates, even relatively minor irregularities for non-evaluated items can result in a materially non-compliant bid under fixed-bid construction tendering.
