This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its decision in Kencor Holdings Ltd. v. Saskatchewan, the Saskatchewan Queen’s Bench held that the government could not rely on undisclosed criteria to bypass a low bidder. The case dealt with a tender call issued by the Government of Saskatchewan for the construction of a bridge. As the Court’s decision explains, Saskatchewan took the position that its general privilege clause allowed it to bypass the low bidder based on an undisclosed local preference policy:
In the tender documentation the following privilege clause appears:
1200-1 . . .
The Minister may refuse to accept any tender, waive defects or technicalities, or subject to Section 13 of the Highways Act accept any tender that he considers to be in the best interests of the Province.
Section 13 of The Highways and Transportation Act, R.S.S. 1978, c. H-3 reads:
Where the minister deems it inexpedient to let the work to the lowest bidder, he shall report the matter to and obtain the authority of the Lieutenant Governor in Council before awarding the contract to any other than the lowest bidder.
According to the Government, the combination of these two clauses permitted it to decline the lowest bid and to approve the more expensive one.
The low bidder sued, arguing that these clauses did not give Saskatchewan the right to rely on undisclosed criteria, maintaining that “in the exercise of its discretion respecting tenders, the Government may not consider policy which is unknown to bidders.” The Court agreed, noting that there “was no indication in the tender documents that preference might be extended to Saskatchewan bidders, and the plaintiff was unaware of this possibility.” The Court found that in the interest of maintaining the integrity of the bidding process, evaluation factors should be clearly disclosed:
To maintain the integrity of the tendering process it is imperative that the low, qualified bidder succeed. This is especially true in the public sector. If governments meddle in the process and deviate from the industry custom of accepting the low bid, competition will wane. The inevitable consequence will be higher costs to the taxpayer. Moreover, when governments, for reasons of patronage or otherwise, apply criteria unknown to the bidders, great injustice follows. Bidders, doomed in advance by secret standards, will waste large sums preparing futile bids. The plaintiff here for example, spent $23,000.00 on its abortive tender.
The plaintiff was awarded lost profit damages due to the government’s improper reliance on undisclosed selection criteria. As this case illustrates, whenever public institutions intend to rely on factors other than best price in making their contract award decisions, those factors should be clearly disclosed to all bidders. This case illustrates the following general principles that have been applied by the courts with respect to the disclosure of evaluation criteria:
- A public institution should not rely on undisclosed evaluation criteria when making a contract award in a formal bidding process.
- A public institution is typically not permitted to rely on a privilege clause to apply undisclosed criteria or hidden preferences.
- Evaluation preferences for factors other than price are typically permitted as long as they are properly disclosed to all bidders.
- The failure to provide proper disclosure of evaluation criteria can constitute a breach of the public institution’s fair tendering duties.
As a general rule, a public institution should therefore strive for transparency and clarity in its evaluation criteria in order to enhance the defensibility of its evaluation process.
