This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its 1993 decision in Edgeworth Construction Ltd. v. N.D. Lea & Associates, the Supreme Court of Canada found that the engineers who were retained to assist the government in the preparation of tender call specifications owed a duty of care to prospective bidders. As the Supreme Court stated:
The engineers undertook to provide information (the tender package) for use by a definable group of persons with whom it did not have any contractual relationship. The purpose of supplying the information was to allow tenderers to prepare a price to be submitted. The engineers knew this. The plaintiff contractor was one of the tenderers. It relied on the information prepared by the engineers in preparing its bid. Its reliance upon the engineers’ work was reasonable. It alleges it suffered loss as a consequence. These facts establish a prima facie cause of action against the engineering firm.
While the Supreme Court considered policy arguments against applying a direct duty of care to the engineers because this would undermine the certainty of contract terms between the respective parties, it ultimately rejected those arguments and found that the engineers owed a duty to prospective bidders. As the Supreme Court explained:
Many professionals in a wide variety of callings and circumstances assume duties toward persons other than those with whom they have contracted, and are held liable in tort for their proper discharge. Typically, the additional risks are reflected in the price of the contract. Alternatively, disclaimers of responsibility to third parties may be issued.
The Supreme Court also stated that a prejudiced bidder’s recourse for design defects in a tender call should not be limited to contract-based claims against the institution that issued the tender call:
The proposition that the only correct way to bring a claim for design defects is by suing the owner in contract, who then may claim over against the design professional, is similarly suspect. The result, in a case such as this, would be that the contractor would not be able to claim against anyone for design defects. Since the province as owner has excluded its responsibility for design defects under the contract, the contractor could not recover against it.
The Supreme Court supported this conclusion by noting that not applying such a duty to the government-retained engineers would compel each bidder to retain its own engineers in order to assess the situation, a time consuming and duplicative practice that would be commercially impractical and would increase project costs. As the Supreme Court noted:
One important policy consideration weighs against the engineering firm. If the engineering firm is correct, then contractors bidding on construction contracts will be obliged to do their own engineering. In the typically short period allowed for the filing of tenders — in this case about two weeks — the contractor would be obliged, at the very least, to conduct a thorough professional review of the accuracy of the engineering design and information, work which in this case took over two years. The task would be difficult, if not impossible. Moreover, each tendering contractor would be obliged to hire its own engineers and repeat a process already undertaken by the owner. The result would be that the engineering for the job would be done not just once, by the engineers hired by the owner, but a number of times. This duplication of effort would doubtless be reflected in higher bid prices, and ultimately, a greater cost to the public which ultimately bears the cost of road construction.
The Supreme Court therefore held that applying a duty to engineers preparing tender call specifications fell within commercial realities and allocated accountability accordingly.
