This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2018 decision in Everest Construction Management Ltd. v. Town of Strathmore, the Court of Appeal of Alberta upheld a low bid bypass that was based on a faster completion time offered by the second-lowest bidder. The Court also rejected the low bidder’s claim that the second-lowest bidder submitted improper prior experience information and should have been rejected for non-compliance.
The case dealt with a tendering process for the construction of a reservoir and pumping station. The low bidder submitted a bid for $6,440,433, with an anticipated completion time of May 15, 2013, but the Town of Strathmore selected the second-lowest bid of $6,474,084 because of the faster proposed completion time of December 31, 2012. The low bidder challenged this decision.
In its defence, the Town argued that the cost savings attributable to the faster completion time offset the slightly higher bid price. The Court upheld the right of the Town to take the completion time into account under its privilege clause since it had asked for bidders to propose their schedule as part of the bidding process. The Court also ruled that the Town was able to accept the prior experience information provided by the bidder, even though that experience related to separate corporate entities without reference to how those entities would be used on the project. The Court rejected the low bidder’s arguments that the Town had a duty to investigate this issue.
While the Town was able to defend the low bid bypass, purchasing institutions would be better served by clearly defining how non-price factors, such as delivery times and past experience, will inform the evaluation and ranking of competing bids in order to avoid similar controversies.
As this case illustrates, asking for non-price information in a low bid award process, and then relying on that information in an undefined manner to inform the ultimate award decision, is a high-risk approach to tendering that can attract legal challenges and costly litigation.
