This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
Tender compliance issues have given rise to numerous recent bid disputes across multiple jurisdictions. Public institutions worldwide face similar challenges when it comes to assessing tender compliance and defending their tender compliance decisions.
For example, in its November 2014 decision in Mogale City Municipality v. Fidelity Security Services, South Africa’s Supreme Court of Appeal upheld a lower court decision that struck down the award of a security services contract due to the improper rejection of a competing bidder. The rejected bidder was disqualified after it was discovered that one of its directors was listed on the registry of contractors and individuals prohibited from doing business with the government. The bidder was unaware of the listing at the time of bid submission and failed to declare the listing as required by the tendering rules. The Court of Appeal determined that the rejection was “patently wrong” since a “bar on awarding a tender does not mean that a possible obstacle to the award of the tender cannot be removed before the decision on the tender is made.” In fact, the bidder had offered to remove the listed director but was not provided with an opportunity to do so. The Court of Appeal ultimately determined that the process was fundamentally flawed due to the procedural error and upheld the lower court decision to strike down the resulting contract award.
However, in its January 2016 decision in Advanced Decisions Vectors, Inc., the U.S. Government Accountability Office (GAO) upheld the rejection of a late bid in a bid dispute over a Department of Homeland Security Request for Quotations (RFQ) for security support services. While the complainant submitted a bid into the government’s e-Buy system before the deadline, that bid was caught in the government’s firewall and never made it to the designated contact person. The GAO dismissed the complaint after finding that the complainant breached the bid submission rules by submitting into the government’s general electronic system rather than submitting directly to the designated contact person as required by the RFQ bid submission rules.
Conversely, in its January 2016 decision in Export 220Volt, Inc., the GAO ordered a re-evaluation of transformer tenders after finding that the government had failed to establish the compliance of the winning bidder’s proposed equipment. The Request for Proposals (RFP) required suppliers to submit product literature to substantiate the acceptability of their proposed products. However, the GAO found that the government neglected to enforce this requirement, simply relying on the winning bidder’s general representation of compliance. The GAO ordered a re-evaluation after noting that “blanket statements of compliance” are insufficient when a solicitation specifically calls for product literature to demonstrate compliance.
On the other hand, in its May 2017 decision in Archus and Gama v. Polskie Górnictwo Naftowe I Gazownictwo S.A., the European Court of Justice ruled that a state-controlled Polish oil and gas company properly rejected a bid due to technical non-compliance. The case dealt with an Invitation to Tender (ITT) for digitizing archival documents. The complainant challenged the process after its bid was rejected for failing to provide required work samples. However, in upholding the bid rejection, the Court ruled that the principle of equal treatment of bidders under the European procurement Directive precluded the acceptance of non-compliant bids, post-bid corrections, or post-bid negotiations.
Further, in its July 2017 decision in Suburban Disposal, Inc. v. City of Camden, the New Jersey Superior Court upheld a contract awarded to a bidder that used the consolidated financial statements of its parent company to meet the financial information requirements in the solicitation. The case dealt with a tender call for the collection of solid waste and recyclables. An unsuccessful bidder challenged the contract award, alleging that the winning bidder was non-compliant for failing to provide the required financial information. The Court disagreed, finding that the information of the parent company, which consolidated the information of its subsidiaries, satisfied the requirements.
In its February 2018 decision in MA.T.I. SUD SpA v. Centostazioni SpA, the European Court of Justice upheld a rectification process that allowed bidders to cure non-compliance with certain submission requirements while also upholding the right for contracting authorities to charge rectification fees to bidders who had to rectify their bids. The dispute dealt with an Italian bidding process for railway maintenance services. Under the Italian rules, rectification fees could be set at between 0.1% and 1.0% of the contract value, up to a maximum of €50,000. One of the bidders failed to sign one of the required forms and was permitted to rectify that oversight on condition of paying a rectification fee of €35,000. While the Court upheld the rectification process and also ruled that rectification penalties were acceptable so long as they were transparent and proportionate, it found that the a rectification fee of €35,000 was a manifestly disproportionate and excessive way of dealing with a rectification over a single missing signature.
In its November 2018 determination in Sunny Juara v. Department of Foreign Affairs, Trade and Development, the Canadian International Trade Tribunal ordered a re-evaluation after finding that the government awarded a contract to a non-compliant bid. The dispute dealt with request for proposals (RFP) for hotel accommodations. The complainant alleged that the award went to a competing bid that failed to meet the requirements relating to in-room telephone services and housekeeping stated in the RFP. The Tribunal agreed, finding “that it was unreasonable for the evaluators to imply, based on the mere physical presence of the phone in a photograph, that local calls were included in the room rate” since “the physical presence of the phone indicates nothing of the charges, if any, that arise from the usage of that phone”. The Tribunal also found that there was nothing in the winning bid “from which evaluators could reasonably infer that cleaning was included in the room rate”. The Tribunal therefore ordered a reconsideration.
In its December 2018 determination in SoftSim Technologies Inc. v. Department of National Defence, the Canadian International Trade Tribunal upheld the government’s right to take bidder representations at face value without looking behind those representations for proof of compliance. The dispute dealt with a request for proposals (RFP) for information technology services. The RFP required proponents to certify that every proposed staff person listed in the proposal would be available to provide the contemplated work if the proposal was awarded the contract. Some of the representations from the winning proponent regarding staff availability later proved to be false. However, the Tribunal ruled that it was an acceptable practice to rely on those submission during the evaluation process, finding that there was no evidence that the government knew, prior to award, that the named resources were unavailable since the proponent only advised of the unavailability after the award. Since the Tribunal found that there was no evidence of collusion between the government and the proponent, it determined that the government was “well within its rights” to rely on the proponent’s representations. It also confirmed that any post-award changes to address the staffing issues were matters of contract administration that fell beyond the Tribunal’s procurement review jurisdiction.
In its December 2018 determination in Valley Associates Global Security Corporation v. Department of Public Works and Government Services, the Canadian International Trade Tribunal ruled that a proposal link to a website failed to satisfy the submission requirements relating to a compliance issue after finding that government evaluators should not be required to search a supplier’s website for information that is not part of its proposal. The dispute dealt with a Royal Canadian Mounted Police (RCMP) Request for Standing Offer for the provision of general duty rifle plates for RCMP members. After finding that the complainant’s proposal failed to address a technical compliance issue, the government evaluators searched the manufacturer’s website to try to determine whether the proposed product satisfied the requirement in question. While that search proved unsuccessful and the proposal was ultimately rejected, the Tribunal expressed concern over this process, stating that it was “somewhat troubled that the Technical Authority searched the manufacturer’s website for additional information relating to the uncertainty regarding the submitted samples” since the “search had the potential of being problematic should Valley have ultimately been declared either responsive or non-responsive based on information found on the website” even though that information was not provided by the bidder.
As this case illustrates, unless the bidding rules clearly establish other evaluation processes, evaluators should limit their evaluations to the information directly provided by bidders and should avoid assuming responsibility of conducting their own independent investigations as a means of confirming a bidder’s compliance.
In its December 2018 determination in Critical Software S.A. v. Department of Public Works and Government Services, the Canadian International Trade Tribunal rejected a non-compliant bidder’s claim after ruling that the bidder should have sought a clarification over the disputed mandatory requirement before submitting its bid. The case dealt with a Department of Defence solicitation for the design, assembly, delivery, and associated maintenance and support for a search and rescue mission system. After the complainant’s bid was rejected as non-compliant for failing to meet the prior project experience requirements, it contested this decision by asserting that the requirement in question was ambiguous. However, the Tribunal rejected the challenge, ruling that the government’s evaluation was reasonable and that the bidder should have sought clarification prior to bidding if it found the prior experience requirements ambiguous.
In its January 2019 determination in Horizon Maritime Services Ltd. v. Department of Public Works and Government Services, the Canadian International Trade Tribunal ordered a re-evaluation after finding that the government accepted the proposal of the winning bidder without properly assessing the technical compliance of that proposal. The dispute dealt with a request for proposals (RFP) for the provision of emergency towing vessel services. The case turned on whether the bidder’s proposed service vessels met the technical requirement of 120 tonnes of pulling power, as evidenced by a certificate of compliance. The Tribunal found that the government failed to show any evidence of technical compliance, stating that “one evaluator chose to concur with the rest of the evaluation team and take it for granted that ATL’s bid was compliant” and that there was “no explicit demonstration of compliance with the terms of the RFP on the face of either certificate” submitted for evaluation. The Tribunal therefore ordered a re-evaluation of the submitted proposals to address this evidentiary issue.
In its February 2019 decision in Hope Village, Inc., the U.S. Government Accountability Office (GAO) ordered a re-evaluation after finding that the government improperly accepted a letter of intent as satisfying the stated binding lease option requirement. The dispute dealt with a Department of Justice request for proposals (RFP) for residential re-entry and home confinement services. The RFP required proponents to prove that they held a “right of use” for the proposed facility in the form of “deeds, leases, bills of sale, options to lease, options to buy, contingency leases, or contingency deeds” that were signed by both parties. While the proponent’s submitted document was labelled a “letter of intent” and was signed by the proponent and landlord, the GAO found that this failed to satisfy the RFP since the proposal contained an inadequate explanation as to how the letter of intent qualified as the “option to lease” requirement. The GAO therefore ordered a re-evaluation of the challenged proposal.
In its March 2019 decision in BCW Group, LLC, the U.S. Government Accountability Office (GAO) overruled the improper rejection of a low bid. The dispute dealt with an electronic reverse auction bidding process for digital boardroom screens. The low bidder was initially disqualified for failing to respond in a timely manner to a post-bid validation request when it was asked to confirm whether its bid price represented all inclusive pricing including maintenance costs. The GAO concluded that the bidder confirmed that its bid included maintenance costs through the electronic reverse auction platform provider, who was acting as an agent for the government, and that it therefore satisfied the requirements for which it had improperly been disqualified.
In its April 2019 decision in Chags Health Information Technology, LLC, the U.S. Government Accountability Office (GAO) determined that the government improperly rejected a bid submitted prior the bid deadline because the bidder provided the password to open an encrypted file after that deadline. The dispute dealt with an information technology services request for proposals for the Department of Health and Human Services. The GAO found that the government was incorrect when it concluded that the bidder’s failure to provide a file password prior to the bid deadline was the same as submitting that file after the deadline. If the bidder failed to provide the password prior to the evaluation, the GAO ruled that the agency could have rejected the proposal. However, the GAO found that the password was in fact provided in time to conduct the evaluation and therefore determined that the agency should “use the password to decrypt the document and evaluate the protester’s proposal”. The GAO also ordered the government to reimburse the protester’s reasonable costs in bringing the bid protest, including attorney’s fees.
In its May 2019 decision in BDO USA, LLP, the U.S. Government Accountability Office (GAO) ordered a re-evaluation after finding that the government conducted an unreasonable security screening process. The dispute dealt with a Department of the Air Force request for quotations for financial operations and systems support services. The protester contended that the agency improperly concluded that its quotation was ineligible for award. The GAO agreed after finding that government failed to consider that a single legal entity could have multiple security screening codes for its multiple locations and that it should not have been disqualified for failing to provide a facility clearance for its home office in Chicago, since nothing in the solicitation called for a screening code for each corporate location.
In its May 2019 decision in Reaction Distributing Inc. v. Algonquin Highlands (Township), the Ontario Court of Appeal found a municipality liable for disqualifying a bidder over the failure to label the outside of its bid as required by the tender call rules. The rejected bidder submitted its bid in a three-ring binder enclosed within an unlabelled box. The municipality rejected that bid and was found liable for $71,063.60 in lost profit damages after the trial court determined that the bid was substantially compliant and should have been accepted. The municipality appealed the decision, but the Court of Appeal upheld the trial ruling, stating that trial judge’s decision was “a factual one that is not to be interfered with absent palpable and overriding error, of which there is none here.” In coming to its decision, the Court of Appeal noted that the municipality failed to provide any reasons regarding why it was not prepared to waive the non-compliance. In other words, the Court of Appeal found that a purchasing institution’s reserved right to accept substantially compliant bids was actually a positive legal duty that required the acceptance of substantially compliant bids unless a reason for rejecting that bid could be provided.
As these recent bid disputes illustrate, purchasing institutions across a broad range of jurisdictions face legal challenges arising out of their tender compliance decisions. These recent cases underscore the importance of ensuring that tender compliance standards are clearly defined and consistently enforced so that public institution are better positioned to defend resulting evaluation decisions and contract awards from legal challenge.
