This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its June 2007 decision in Scott v. Belfast Education and Library Board, the High Court of Justice in Northern Ireland applied the same implied tendering law duties that have long been applied by Canadian courts under the Contract A process contract. The case dealt with a construction tender call issued by the purchaser, the Belfast Education and Library Board (referred to as the employer in the decision). The plaintiff bidders challenged the process due to alleged defects in the procurement documents. They argued that they were owed an implied duty of fairness and good faith by the purchasing institution. As the Court noted, the plaintiffs relied on prior UK cases that applied these implied tendering process duties:
In essence the plaintiffs argue for an implied contract between tenderers and prospective employers which it is said has developed at common law and has emerged in parallel with legislation on the domestic and European scene in relation to public service contracts and the public interest in relation to the management of public service contracts. A number of cases have discussed the development of implied contracts during tendering and the plaintiffs rely in particular on an extensive judgment of Judge Humphrey Lloyd QC in the Technology and Construction Court in England and Wales in Harmon CFEM Facades (UK) Ltd v The Corporate Officer of the House of Commons [1999] All ER (D) 1178 and the decision of the Privy Council in Pratt Contractors Ltd v Transit New Zealand [2003] UKPC 83.
The Court sided with the plaintiff bidders in finding that an implied contract, known in Canada as Contract A, can be created by the submission of a tender in response to a tender call, and that an implied term of this contract is a duty of fairness and good faith owed to bidders:
I am satisfied that an implied contract can arise from the submission of a tender. It may arise by inference from the scheme of the tendering process and the presumed intention of the parties.… The parties to such a public works contract as the present are parties to an elaborate tendering process which is designed to achieve best value for the provision of public services. An implied contract arises in the present case…I am satisfied that the implied terms of such an implied contract extend to the implied terms of fairness and good faith.
The Court then enumerated specific duties relating to the disclosure of material information and to the fair evaluation of tenders:
- Fairness applies to the nature and application of the specified procedures in a particular contract.
- Fairness applies to the assessment of the tenders according to the stated criteria.
- Fairness applies to the evaluation of the tenders in a uniform manner and as intended by the tender documents.
As this decision illustrates, the implied common law principles that have long been part of Canada’s tendering terrain are now affecting other Commonwealth jurisdictions and exposing public institutions in those jurisdictions to lost profit damages claims.
