This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its July 2004 decision in Clare Civil Engineering Ltd. v. Mayo County Council, the High Court of Ireland awarded lost profits to an improperly rejected bidder. The dispute dealt with a tendering process for the construction of the Knock-Claremorris bypass, for which a contract was awarded for over IR£7 million. A losing bidder sued for damages pursuant to applicable procurement regulations, arguing that its bid should not have been rejected for non-compliance. The rejected bidder had left certain line items blank on its price form since the amended instructions to bidders removed those items from the scope of the contract. However, the price form was never amended to reflect that change. The Court concluded that the bid was improperly rejected owing to a manifest error on the part of the purchasing institution:
I have therefore come to the conclusion that the opinion which the applicants formed as to the correct construction of the above portions of the contract documents was correct and the conclusion reached by the respondents which led to their decision to eliminate the applicant’s tender was a clearly established or manifest error. The applicants had not engaged in “zero rating”. Hence the manner in which they dealt with items 20 and 21 in the Bill of Quantities did not bring them within clause 13 (a) of the Instructions to Tenderers, with the consequence of activating clause (14) (a) (iv) of the Instructions to Tenderers.
The Court also found that there was a causal connection between the improper rejection of the bidder’s bid and that bidder’s loss of a contract award. The Court concluded that the award of lost profit damages was therefore an appropriate remedy in the circumstances:
I am satisfied that the contract having been awarded to Frank Harrington Ltd., and the tender of the applicant having been unlawfully eliminated, and it being common case that the applicants tender price was substantially below that of Frank Harrington Limited, it in my view necessarily follows, that but for the unlawful elimination of its tender, the applicants would have been successful in winning the contract and hence it follows in my view that the respondents are liable to them in damages for whatever recoverable losses having suffered by the applicants.
As this case illustrates, the improper rejection of a bid for non-compliance can attract legal remedies which, in certain jurisdictions, can include lost profit awards if it can be shown that the improper rejection cost that bidder a contract award that it would have otherwise won had its bid been accepted. Purchasing institutions should tread with caution before rejecting bids for submission form errors. Where the law permits, purchasing institutions should implement procedures that allow for the rectification of bid omissions since dealing with those issues through cure periods is preferable to dealing with those same issues through protracted and high-risk litigation.
