The 3 R’s: RFP’s, RFTs andRFEI:An analysis of the Risks, Rewardsand Obligations Associated with aCall for ProposalsBy: Kar...
27 May 2013 Dentons Canada LLP 2• every Owner wants to secure the best contractor/design-builder for thebest price• the qu...
27 May 2013 Dentons Canada LLP 3• What are the risks associated with each approach:• competition:• disputes over bid/tende...
27 May 2013 Dentons Canada LLP 4• What are the benefits of each approach:• competition:• the award of the contract to the ...
Key SCC Decisions27 May 2013 Dentons Canada LLP 5• Contract A / Contract B• Contract A or tendering contract – offer by Ow...
Key SCC Decisions27 May 2013 Dentons Canada LLP 6• Whether or not Contract A comes into existence depends upon theintentio...
27 May 2013 Dentons Canada LLP 7“Lowest or any tender not necessarily accepted”“Owner reserves the right to reject any or ...
Key SCC Decisions27 May 2013 Dentons Canada LLP 8• Terms of Contract A contained an implied term that Owner must be fairan...
Key SCC Decisions27 May 2013 Dentons Canada LLP 9• the implied duty of fair and equal treatment does not impose upon theOw...
Key SCC Decisions27 May 2013 Dentons Canada LLP 10• exclusion of liability clauses are enforceable by owners• disagreement...
Key SCC Decisions – Exclusion Clauses Examples27 May 2013 Dentons Canada LLP 11• Except as expressly and specifically perm...
27 May 2013 Dentons Canada LLP 12• whether, as a matter of interpretation the exclusion clause applies to thecircumstances...
Integrity of Bidding System27 May 2013 Dentons Canada LLP 13• Owners responsibility to treat bidders fairly and equallyvs....
Tenders vs. Non-Bidding RFPs27 May 2013 Dentons Canada LLP 14• Is there a tendering contract – Contract “A” that can be en...
RFPs27 May 2013 Dentons Canada LLP 15• the purpose of an RFP is to request expressions of interest from theparties• sets o...
Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Can...
Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Can...
Tercon – the facts:27 May 2013 Dentons Canada LLP 18• In Tercon, the Province of British Columbia sought to find a contrac...
Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Can...
Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Can...
Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Can...
Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Can...
Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Can...
The Importance of Negotiation27 May 2013 Dentons Canada LLP 24• a procurement process that does not provide for the possib...
27 May 2013 Dentons Canada LLP 25• in Mellco, the Court of Appeal held that the RFP did not create a bindingcontractual ag...
The Importance of Negotiation (cont’d)27 May 2013 Dentons Canada LLP 26• the owner simply invited the submission of propos...
Duties and Obligations in the Context of an RFP27 May 2013 Dentons Canada LLP 27• In the formal tendering context involvin...
Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 28• in Khoury Real Estate Services L...
Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 29• the court concluded that:…The ap...
Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 30• In Mellco, Justice Scott framed ...
Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 31Within the continuum, in the insta...
Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 32• in Powder Mountain Resorts (2001...
Duties and Obligations in the Context of an RFP27 May 2013 Dentons Canada LLP 33• the precise nature of an owner’s obligat...
Drafting Considerations and Avoiding ContractualLiability27 May 2013 Dentons Canada LLP 34• it is the substance and terms ...
Deposit/Security27 May 2013 Dentons Canada LLP 35• Buttcon correctly points out that established timelines and depositrequ...
Negotiations27 May 2013 Dentons Canada LLP 36• owners should leave room for meaningful negotiation in an RFP• as the court...
Negotiations27 May 2013 Dentons Canada LLP 37• by way of contrast in M.J.B. Enterprises, it was held that Contract Aarose ...
Lack of Finalized Plans27 May 2013 Dentons Canada LLP 38• the lack of finalized plans within the RFP is closely related to...
Evaluation Criteria27 May 2013 Dentons Canada LLP 39• An RFP should make it abundantly clear that a wide range of criteria...
Other Criteria for Inclusion27 May 2013 Dentons Canada LLP 40• an owner wishing to avoid formation of a preliminary contra...
Potential for Liability in RFPs27 May 2013 Dentons Canada LLP 41• can a properly drafted RFP still result in liability for...
Potential for Liability in RFPs (cont’d)27 May 2013 Dentons Canada LLP 42• the 2004 RFP came about as a result of the canc...
Potential for Liability in RFPs (cont’d)27 May 2013 Dentons Canada LLP 43• complaints were brought forward by certain losi...
Potential for Liability in RFPs (cont’d)27 May 2013 Dentons Canada LLP 44• the Court found that the Crown breached its dut...
Potential for Liability in RFPs (cont’d)27 May 2013 Dentons Canada LLP 45• the Crown amended the selection criteria in res...
Negligence or Negligent Misrepresentation27 May 2013 Dentons Canada LLP 46• Although liability in tendering and RFP situat...
Negligence or Negligent Misrepresentation (cont’d)27 May 2013 Dentons Canada LLP 47• the court undertook a broad analysis ...
No Duty of Care in Negotiations27 May 2013 Dentons Canada LLP 48• an RFP is tantamount to an invitation to negotiate• the ...
Concluding Words27 May 2013 Dentons Canada LLP 49• it is difficult to predict what a court might do in circumstances where...
Concluding Words27 May 2013 Dentons Canada LLP 50• a carefully prepared RFP document will help to ensure that the dutiesth...
Questions?Karen GroulxD +1 416 863 4697karen.groulx@dentons.comDentons Canada LLP51
The preceding presentationcontains examples of thekinds of issues companiesdealing with Risks, Rewardsand Obligations coul...
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The 3 R’s: RFP’s, RFTs and RFEI: An analysis of the Risks, Rewards and Obligations Associated with a Call for Proposals

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In this presentation, Karen Groulx discusses The 3 R's: RFP's, RFTs and RFEI, topics include:

Key SCC Decisions
Integrity of Bidding System
Tenders vs. Non-Bidding RFPs
RFPs
Factors or terms that courts have recognized which are “indicative of an intent to form contract A”
Tercon - the facts
The Importance of Negotiation
Deposit/Security
Negotiations
Lack of Finalized Plans
Evaluation Criteria
Other Criteria for Inclusion
Potential for Liability in RFPs
Negligence or Negligent Misrepresentation
No Duty of Care in Negotiations

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The 3 R’s: RFP’s, RFTs and RFEI: An analysis of the Risks, Rewards and Obligations Associated with a Call for Proposals

  1. 1. The 3 R’s: RFP’s, RFTs andRFEI:An analysis of the Risks, Rewardsand Obligations Associated with aCall for ProposalsBy: Karen Groulx27 May 2013Dentons Canada LLP
  2. 2. 27 May 2013 Dentons Canada LLP 2• every Owner wants to secure the best contractor/design-builder for thebest price• the question is – what is the best method for achieving these goals:• competition• negotiation
  3. 3. 27 May 2013 Dentons Canada LLP 3• What are the risks associated with each approach:• competition:• disputes over bid/tendering package• loss of “discretion” by Owner• negotiation:• increased cost• no guarantee that contractor will agree to terms sought by Owner• ability of contractor to withdraw from the process prior to acceptance by Owner
  4. 4. 27 May 2013 Dentons Canada LLP 4• What are the benefits of each approach:• competition:• the award of the contract to the successful bidder• negotiation:• flexibility is reserved to the Owner to negotiate the best price on the best terms
  5. 5. Key SCC Decisions27 May 2013 Dentons Canada LLP 5• Contract A / Contract B• Contract A or tendering contract – offer by Owner to enter into Contract Aand offer by tenderer to enter into Contract B - arises on submission ofvalid tender, with terms determined by tender documents:• irrevocability of bid• obligation of both parties to enter into Contract B upon acceptance of tender• obligation on the part of accepted tenderer to perform the workRon Engineering (1981)
  6. 6. Key SCC Decisions27 May 2013 Dentons Canada LLP 6• Whether or not Contract A comes into existence depends upon theintention of the parties:• paramount inquiry is whether the parties intended “to initiate contractualrelations by the submission of a bid in response to the invitation to tender”• courts may look outside the four corners of the document and look to impliedterms to determine the presumed intention of the parties• courts will not interfere with Owner’s stated right under a “privilege clause”provided Owner does not breach terms of Contract “A” by accepting non-compliant bid• “Privilege Clause” must be read in harmony with rest of tenderdocumentsM.J.B. Enterprises (1999)
  7. 7. 27 May 2013 Dentons Canada LLP 7“Lowest or any tender not necessarily accepted”“Owner reserves the right to reject any or all Tenders, including withoutlimitation the lowest Tender, and to award the Contract to whomever theOwner in its sole and absolute discretion deems appropriatenotwithstanding any custom of the trade to the contrary nor anythingcontained in the Contract Documents or herein. Owner shall not underany circumstances, be responsible for any costs incurred by the Tendererin preparing of its Tender.”M.J.B. Enterprises: right of owner to exercise discretion must be consistentwith terms of bid documents - owner cannot rely on discretion clause toaccept non-compliant bidM.J.B. Enterprises (1999) (cont’d)
  8. 8. Key SCC Decisions27 May 2013 Dentons Canada LLP 8• Terms of Contract A contained an implied term that Owner must be fairand consistent with tender bids (“duty of fair and equal treatment”)Martel (2000)
  9. 9. Key SCC Decisions27 May 2013 Dentons Canada LLP 9• the implied duty of fair and equal treatment does not impose upon theOwner a duty to investigate representations made on the face of the bid• the imposition of an implied term depends upon its obviousness, itsmateriality and its consistency• goal is protecting and promoting the integrity of the procurement process• avoid subjecting parties to Contract B to constant surveillance and scrutiny byunsuccessful biddersDouble N Earthmovers (2007)
  10. 10. Key SCC Decisions27 May 2013 Dentons Canada LLP 10• exclusion of liability clauses are enforceable by owners• disagreement on application of clause at issue:• whether Contract A was created between the Owner and Tercon – it was• whether Contract A was breached by the Owner – it was• whether and under what circumstances the parties may rely on clauses thatlimit or exclude liability even where the party has fundamentally breached theirobligationsTercon (2010)
  11. 11. Key SCC Decisions – Exclusion Clauses Examples27 May 2013 Dentons Canada LLP 11• Except as expressly and specifically permitted in these Instructions toProponents, no Proponent shall have any claim for any compensation ofany kind whatsoever, as a result of participating in this RFP, and bysubmitting a proposal each Proponent shall be deemed to have agreedthat it has no claim.Tercon
  12. 12. 27 May 2013 Dentons Canada LLP 12• whether, as a matter of interpretation the exclusion clause applies to thecircumstances – parties intentions subject to assessment• if the inclusion clause applies – whether the exclusion clause wasunconscionable at the time the contract was made “as might arise fromsituations of unequal bargaining power between the parties”• whether the court should nevertheless refuse to enforce the validexclusion clause because of the existence of an overriding public policyproof of which lies in the party seeking to avoid enforcement of theclause, that out weights the very strong public interest in the enforcementof contractsTercon (continued)
  13. 13. Integrity of Bidding System27 May 2013 Dentons Canada LLP 13• Owners responsibility to treat bidders fairly and equallyvs.• Owners reserved right to award to bidder of its choosing
  14. 14. Tenders vs. Non-Bidding RFPs27 May 2013 Dentons Canada LLP 14• Is there a tendering contract – Contract “A” that can be enforced”• Was there an intention to create Contract A?
  15. 15. RFPs27 May 2013 Dentons Canada LLP 15• the purpose of an RFP is to request expressions of interest from theparties• sets out Owner’s intention to consider those expressions of intent andthen to undertake those negotiations with one or more parties whoseproposal(s) appeal to owner• successful Proponent in context of an RFP has only won the opportunityto negotiate for a contract – not necessarily the right to enter into acontract
  16. 16. Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Canada LLP 161) the irrevocability of the bid;2) the formality of the procurement process;3) whether tenders are solicited from selected parties;4) whether there was anonymity of tenders;5) whether there is a deadline for submissions and for performance of the work;6) whether there is a requirement for a security deposit;7) whether evaluation criteria are specified;8) whether there was a right to reject proposals;9) whether there was a statement that this was not a tender call;10) whether there was a commitment to build;11) whether compliance with specifications was a condition of the tender bid;12) whether there is a duty to award contract B; and13) whether contract B had specific conditions not open to negotiation [emphasisadded].
  17. 17. Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Canada LLP 17• no single factor is dispositive of the issue• even such indicia as a requirement for a security deposit or the existenceof established timelines, which are generally associated with formaltender calls, are not absolutely determinative either• all of the factors, viewed objectively, must be considered to determine theintention of the parties
  18. 18. Tercon – the facts:27 May 2013 Dentons Canada LLP 18• In Tercon, the Province of British Columbia sought to find a contractor toconstruct a gravel highway.• It first issued a Request for Expressions of Interest (RFEI) based on a design-build model that required the contractor to design and construct the highway at afixed price.• The RFEI was anticipated to culminate in the creation of a short list of threequalified contractors who would then proceed to the next round of submissions.• Six tenderers, including the plaintiff (Tercon) and another company (Brentwood)responded to the RFEI; however, before the process continued, the Provincedecided to change the delivery model of the project from the design-build modelto an “alliance” model, whereby the successful tenderer would enter into analliance contract with the Province but remain responsible for any cost overruns.• Instead of shortlisting the RFEI respondents, the Province allowed all of them tosubmit RFPs based on this new model and further established that no one exceptthe initial RFEI respondents could submit proposals at the RFP stage.
  19. 19. Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Canada LLP 19• there was no uncertainty in the process or in the owner’s commitment toit• the procurement process was formal with explicitly prescribeddocumentation required according to design specifications set out in theRFP• the nature of the work and materials were specific with no fundamentaldetails awaiting input from tenderers• a tenderer was subject to failure if it did not comply with thespecifications• although entitled an RFP, the documentation did not say that this was nota tender callTercon factors:
  20. 20. Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Canada LLP 20• bids were irrevocable for 60 days• only parties selected from the RFEI process were invited to submitproposals• a security deposit was required according to a specific form• deadlines were imposed• evaluation criteria was specified which was not subjective in nature• a specific form of “alliance” agreement was attached to the procurementdocuments-- a tenderer was required to accept this form of Contract Bsubstantially in the form as attached
  21. 21. Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Canada LLP 21• there was a duty upon a tenderer selected to negotiate the allianceagreement in good faith to reach and execute an agreement [the Courtnoted that this factor was clearly indicative of an intention to contract asthe defendant could not have secured such a duty independent of anexplicit contractual term i.e., the good faith requirement is antithetical to atrue negotiation]• the price and other essential terms of the alliance agreement were fixedand non-negotiable
  22. 22. Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Canada LLP 22• the the trial judge’s analysis of RFP versus tenders was accepted:The trial judge did not mechanically impose the Contract A – Contract Bframework, but considered whether contract A arose in light of her detailedanalysis of the dealings between the parties. That was the right approach.She reviewed in detail the provisions of the RFP which supported her conclusionthat there was intent to create contractual relations upon submission of acompliant bid...
  23. 23. Factors or terms that courts have recognized whichare “indicative of an intent to form contract A”:27 May 2013 Dentons Canada LLP 23• There is, therefore, no basis to interfere with the judge’s finding thatthere was an intent to create contractual relations upon submissionof a compliant bid. I add, however, that the tender call in this case didnot give rise to the classic Contract A – Contract B framework in whichthe bidder submits an irrevocable bid and undertakes to enter intocontract B on those terms if accepted. The alliance model process whichwas used here was more complicated than that and involved good faithnegotiations for a contract B in the form set out in the tender documents.But in my view, this should not distract us from the main question here[emphasis added].• Lessons of Tercon: Substance over Form (Labels are notDeterminative)
  24. 24. The Importance of Negotiation27 May 2013 Dentons Canada LLP 24• a procurement process that does not provide for the possibility ofnegotiation is highly indicative of a formal tender and not an RFP• An offer to negotiate is generally not considered to give rise tocontractual relations --- a bare agreement to negotiate has no legalcontent• this is consistent with the recognized rationale of the formal tendering process,which is to replace negotiation with competition• if the final terms of the contract are contained in the bid itself or a form ofthe final contract is attached to the RFP (i.e. there is no need fornegotiation), courts will “readily find a valid tender and not a mereinvitation to treat”
  25. 25. 27 May 2013 Dentons Canada LLP 25• in Mellco, the Court of Appeal held that the RFP did not create a bindingcontractual agreement, in part because it was clear to the court that theRFP conveyed an intent by the City to negotiate with the bidder thatpresented the “most attractive” proposal• One paragraph of the RFP provided that:“This is an invitation for proposals and call. The city would negotiate with the applicant that presentedthe “most attractive proposal.” In the event the sale transaction did not close, the city would thennegotiate with the next most attractive applicant” [emphasis added].’• in Powder Mountain Resorts (2001) (BCCA)- the terms of a proposedcontract were not specified in the invitation for proposals
  26. 26. The Importance of Negotiation (cont’d)27 May 2013 Dentons Canada LLP 26• the owner simply invited the submission of proposals, stating that it maygrant development rights. -- the submission of a proposal did not obligatethe tenderer to develop, nor did it obligate the owner to allow thedevelopment of the area• a significant factor in the Tercon matrix appears to be the degree towhich subsequent negotiations are contemplated
  27. 27. Duties and Obligations in the Context of an RFP27 May 2013 Dentons Canada LLP 27• In the formal tendering context involving Contract A/Contract B, biddersmust be treated fairly, equitably, and in good faith• these expectations include:• the obligation of the owner to disclose any preferences that may affect theselection of a successful tenderer,• to accept only conforming bids, and• to refrain from the wording of a form of contract that is materially different fromContract B• with respect to RFPs, courts have found that in certain cases, the ownermay be subject to a duty of fairness in considering the proposals, eventhough no Contract A exists
  28. 28. Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 28• in Khoury Real Estate Services Ltd. v. Canada (Minister of Public Works& Government Services)(1997) (Fed. Ct.) the Ministry issued an RFPwhich contained and described a procedure for evaluation of theproposals submitted• the tenderer applied for judicial review for an order requiring the Ministryto provide the tenderer with written details of its evaluation of the tenderproposals• the court reasoned that an RFP situation was not comparable to anormal tender process where comparison with other bids is relativelyeasy, and because of this, “something more” was required to insure theintegrity of the tender process
  29. 29. Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 29• the court concluded that:…The applicants in an open tendering process which did not set out in theinvitation to tender any limitation on the information to be provided by therespondents in regard to their evaluation of proposals, were entitled to expectinformation about proposals generally that would demonstrate fairness in theirevaluation. In my opinion, by its refusal to provide to tenderers any information inrelation to its evaluation, even in general terms, by marks assigned to the variousproposals submitted, [the Ministry] failed in its responsibility to demonstrate that itacted fairly in evaluation of the proposals, a demonstration that is a key elementof the open tendering process [emphasis added].11Ibid. at para. 36.
  30. 30. Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 30• In Mellco, Justice Scott framed the duty to negotiate in good faith as acontinuum:I agree with counsel for the plaintiffs that the question of the duty to negotiatein good faith with respect to bids (be they a tender or proposal) is a form ofcontinuum. At one end are the formal tender cases invoking the principles ofRon Engineering. At the other end are cases where, for example, an ownerrequests a simple quote. There is obviously a lot of territory between these twoextremes. The fact situation before us falls somewhere in between the twoextremes. On the one hand, there is a detailed request for proposals mandatingthat they must contain a security deposit and remain open for a length of time.Conversely, the RFP does not create Contracts A or B and envisions continuingnegotiations with the “lead proponent” that submits the most “attractive proposal”.
  31. 31. Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 31Within the continuum, in the instant case there was, in my opinion, an obligation on the partof the city to conduct itself fairly and in good faith. Without some fairness in the systemproponents could incur significant expenses in preparing futile bids which could ultimatelylead to a negation of the process. In circumstances such as those before us, there must beenough fairness and equality in the procedures to ensure its safety and openness.But this is not a formal tendering situation. As we have seen, the principles of fairness andgood faith are not determined in a vacuum, but rather are implied based on the intentionsand expectations of the parties. In a Ron Engineering type of tendering process, therequirement of good faith and fairness is a term that is implied into Contract A. But there isno Contract A in this case. It is merely a request for proposals opening up a process ofnegotiation. Even if the absence of a Contract A is not an obstacle to finding some duty ofgood faith and fairness, I am not at all persuaded that the plaintiffs were treated unfairly orthat the city acted in bad faith…The duty to refrain from awarding a form of contract that issignificantly different than Contract A has no application to the situation calling for proposalsonly [emphasis added]. 22Ibid. at paras. 80-84.
  32. 32. Duties and Obligations in the Context of an RFP(cont’d)27 May 2013 Dentons Canada LLP 32• in Powder Mountain Resorts (2001) (BCCA), the RFP did not disclosethe precise specifications for the project, as is often the case with RFPs,and the selection process involved the consideration of several factorsbeyond that of just price• On appeal, Justice Newburry confirmed that the case did not give rise toa contract of the sort envisioned by Ron Engineering, and that “in theabsence of contract, no free-standing enforceable duty of fairness arises
  33. 33. Duties and Obligations in the Context of an RFP27 May 2013 Dentons Canada LLP 33• the precise nature of an owner’s obligations in the non-Contract A contextis unclear• Mellco and Buttcon both suggest that an owner should treat tenderers fairly• Powder Mountain Resorts explicitly provides that no duty of fairness arises inan RFP
  34. 34. Drafting Considerations and Avoiding ContractualLiability27 May 2013 Dentons Canada LLP 34• it is the substance and terms of the RFP that governs not the labelsattached to them• Irrevocability -- Irrevocability is the hallmark of formal tendersRon Engineering:• the principal term of Contract A is the irrevocability of the bid,• the corollary term is the obligation in both parties to enter into a contract(Contract B) upon the acceptance of a tender”• if a bid may be revoked at any time by the tenderer, it is an argumentsupporting an RFP• the tradeoff is the increased risk the owner faces in tenderers backing outprior to acceptance by the owner
  35. 35. Deposit/Security27 May 2013 Dentons Canada LLP 35• Buttcon correctly points out that established timelines and depositrequirements are common both to RFPs and formal tender situations,and that “they alone do not establish whether a particular situation is or isnot a formal tender situation• The prudent owner that wishes to engage in a formal bidding process willalmost always require a deposit to ensure that tenderers are committedto their tenders, in order to induce competition and obtain the best pricepossible• the risk with an RFP with no security deposit requirements is thatproponents will have less of an incentive to commit to their proposals
  36. 36. Negotiations27 May 2013 Dentons Canada LLP 36• owners should leave room for meaningful negotiation in an RFP• as the court in Buttcon noted, the prospect of extensive negotiationsuggests a situation that is quite different from Ron Engineering• indicators of intended negotiations in an RFP include a “tentative” schedule foran “extended period” (weeks or even months) to allow for “negotiation of finalagreements
  37. 37. Negotiations27 May 2013 Dentons Canada LLP 37• by way of contrast in M.J.B. Enterprises, it was held that Contract Aarose because:i. the owner did not invite negotiations over the terms of either Contract A orContract B;ii. (the only items to be added to the tender form by the tenderer includedsuch standard information as dates, signatures and names of the partiesthat would be working on the project; andiii. the Instruction to Tenderers suggested a special procedure for anynegotiations, “presumably so that if a suggested amendment is accepted alltenderers may be notified so that they may also enter an alternate bid”.
  38. 38. Lack of Finalized Plans27 May 2013 Dentons Canada LLP 38• the lack of finalized plans within the RFP is closely related to therequirement for negotiation• in Buttcon, the court held that there was no Contract A, partly because at thetime the RFP was issued, the owner had not made any decision regarding thenumber of required projects or their locations, and those issues were notresolved until after all of the proposals were received• the court held that the “most telling evidence” in the case were the fourrenderings submitted by the four tenderers, which were “as different as theycould possibly be”3, and that had this been merely a tender call, the proposalscould (and would) not have looked so very different3Ibid. at para. 41.
  39. 39. Evaluation Criteria27 May 2013 Dentons Canada LLP 39• An RFP should make it abundantly clear that a wide range of criteria arebeing used to determine the winning proposal and that the owner hasdiscretion to make its selection based on multiple criteria, rather than justprice which is a purpose of the tendering process• in Buttcon, the evaluation criteria suggested something “much more thana cost comparison”, and included:• the design quality and operation efficiency of the submission,• the total net cost to the owner over a 50-year horizon,• the financial capacity and stability of the tenderer,• the proven expertise of the tenderer on projects of similar size and scope,• the ability of the proponent to deliver the project on time, and• the suitability of the site(s)
  40. 40. Other Criteria for Inclusion27 May 2013 Dentons Canada LLP 40• an owner wishing to avoid formation of a preliminary contract by thesubmission of a proposal may:in Buttcon, the evaluation criteriasuggested something “much more than a cost comparison”, andincluded:• reserve the right to reject any or all proposals and to re-advertise or recommence the RFP process if itdesires (this is known as “privilege clause” and is discussed further below);• reserve the right to develop all, some or none of the land subject of the RFP;• reserve the right to hold negotiations with multiple bidders and to request additional information orfurther clarification from multiple parties;• reserve the right to waive any irregularities in the proposal (known as a “discretion clause”);• reserve the right to accept the proposal, which in the sole opinion of the owner, is deemed “the mostadvantageous”;• take no responsibility for the tenderer lacking information or for the accuracy of the informationprovided in the RFP documents; and• take no responsibility for any expense incurred by a tenderer in preparing or submitting its proposal
  41. 41. Potential for Liability in RFPs27 May 2013 Dentons Canada LLP 41• can a properly drafted RFP still result in liability for the owner?• formal tenders are subject to an implied duty of good faith and fairness,which requires owners to accept only compliant bids and to treat allbidders fairly and equally• the scope of such a duty will be determined by the parties intentions asset out in the tender documents• While Powder Mountains found that no duty arises, Mellco suggested afreestanding duty of fairness lies on a continuum• in Envoy Relocation Services Inc. v. Canada (Attorney General ((2013)(On S.C.), the Court considered what it described as a “flawed”procurement process where the Crown re-tendered a contract forrelocation services for armed forces and government personnel
  42. 42. Potential for Liability in RFPs (cont’d)27 May 2013 Dentons Canada LLP 42• the 2004 RFP came about as a result of the cancellation of the 2002contract• every bidder for the 2002 contract, except the incumbent contractor,Royal Lepage Relocation Services (“RLRS”) was disqualified• the Court concluded that this was a contributing factor to the Crown’sdecision to re-tender the bids
  43. 43. Potential for Liability in RFPs (cont’d)27 May 2013 Dentons Canada LLP 43• complaints were brought forward by certain losing bidders to theCanadian International Trade Tribunal (“CITT”) who determined thatthere was some impropriety in the manner in which bids were “scored”and recommended a revaluation be made using an appropriate scoringmatrix• the Crown’s initial reaction was to proceed with the recommendation of are-valuation, but the Crown changed its mind following conflict of interestallegations made by the Plaintiff and made the decision to conduct a fullre-tender of the contracts• the Court concluded that the Crown’s decision to re-tender was a validone finding that the 2002 tender was not conducted fairly, that there wasinsufficient time to properly conduct the process and that the non-incumbent parties suffered as a result of the Crown’s tardiness
  44. 44. Potential for Liability in RFPs (cont’d)27 May 2013 Dentons Canada LLP 44• the Court found that the Crown breached its duty of fairness in its handling of thenew tender and noted that a duty of fair and equal treatment of bidders includesan obligation to ensure that bidders are not provided any unfair advantage ordisadvantage by undisclosed preferences in tender documents or instructions tobidders during the bidding period• The Court further noted that the implied duties include the duties to treat allbidders fairly and equally; to disclose relevant, accurate information; to avoidconflict of interest or reasonable apprehension of bias; to evaluate bids usingdisclosed criteria; to reject non-compliant bids; and to award Contract B on theterms set out in the tender documents• the Court further noted that the incumbent contractor, RLRS commencedlitigation against the Crown to claim for loss of profits from the cancellation of the2002 contract
  45. 45. Potential for Liability in RFPs (cont’d)27 May 2013 Dentons Canada LLP 45• the Crown amended the selection criteria in response to complaints made byRLRS and misled the other bidders as to the reason for changing their method ofselection to increase the weight of technical merit to three times that of price• the Court determined that the amendment of the method of selection wasintended by the Crown to favour RLRS and was done in bad faith• the Court found that the Crown had acted intentionally to unfairly favour RLRS byrepeating the 2002 Property Management Services provisions in the 2004 RFPand by modifying the selection formula to play to RLRS’ strengths• Superior Court Justice Peter Annis also found Royal LePage Relocation Serviceshad insider knowledge as the incumbent that gave it an advantage in its contractbid• the Plaintiff was awarded damages of $29,166,507 plus another $10 million incosts for the government’s “reprehensible” actions in the case which includedconcealment of relevant documents
  46. 46. Negligence or Negligent Misrepresentation27 May 2013 Dentons Canada LLP 46• Although liability in tendering and RFP situations is usually governed bycontract, liability can also be founded under the heading of various torts,the most expansive of which is negligence• Opron Construction Co. v. Alberta (1994) (Alb. Q.B.) involved a formal tender call where bids weresolicited for various projects surrounding the construction of a dam.• complex information about geological conditions and other elements of the project was required forproper bid estimates to be submitted and the owner put together an information package that was partof the tender documents.• tenderers, including the plaintiff, used this information to make their bids, and the plaintiff wasultimately awarded the project.• before the completion of the tendering process, a report became available to the owner that made itclear that much of the information in the tender documents was clearly incorrect, yet no steps weretaken to correct the documents or to make tenderers aware of the new report.• the plaintiff discovered that information had been concealed from it and sued the defendant for breachof contract, and for negligent misrepresentation and deceit.
  47. 47. Negligence or Negligent Misrepresentation (cont’d)27 May 2013 Dentons Canada LLP 47• the court undertook a broad analysis of the tortious duties owed in thetendering process and ultimately concluded that the defendant was liableboth in negligence and in deceit.• According to Justice Feehan in Opron:"[t]he law may…place upon a party an obligation to speak [and revealinformation] from the outset, originating in the nature of the relationshipbetween the parties. If that duty of care is breached, the positivemisstatement or nondisclosure may be actionable in deceit or negligence.”
  48. 48. No Duty of Care in Negotiations27 May 2013 Dentons Canada LLP 48• an RFP is tantamount to an invitation to negotiate• the Supreme Court in Martel Building (2000) as a general proposition, no duty ofcare arises in conducting negotiations…a duty to bargain in good faith has notbeen recognized to date in Canadian law• Martel makes it clear that a properly worded RFP will not give rise to a duty ofcare between it and proponents to the submission process• in addition, express provisions set out in the RFP documents which disclaim theaccuracy of information provided by the owner and put a positive obligation onthe proponent to conduct its own investigation of the matters relevant to theproject at issue will help to insulate the owner from liability for inaccurateinformation
  49. 49. Concluding Words27 May 2013 Dentons Canada LLP 49• it is difficult to predict what a court might do in circumstances wherelosing proponents seek to challenge the process undertaken by an ownerwho uses the RFP process to identify and select a successful proponent• the law surrounding the RFP/tender distinction has not materiallydeveloped since the Tercon case• nevertheless, there are certain principles that can be drawn from thecases -- intention remains the governing consideration in the RFP/tenderdistinction
  50. 50. Concluding Words27 May 2013 Dentons Canada LLP 50• a carefully prepared RFP document will help to ensure that the dutiesthat arise from a formal tender process will not attach to the less formaland less structured RFP process• however, as Sandori & Pigott remark in their treatise: Bidding andTendering – What is the Law?, 3rd ed. (Markham: LexisNexis Canada,2004), “the owner is exposed to the risk that the proponent which looksso willing today may change its mind tomorrow – when the execution of acontract is at hand – and there is little the owner can do to prevent it”.
  51. 51. Questions?Karen GroulxD +1 416 863 4697karen.groulx@dentons.comDentons Canada LLP51
  52. 52. The preceding presentationcontains examples of thekinds of issues companiesdealing with Risks, Rewardsand Obligations could face.If you are faced with one ofthese issues, please retainprofessional assistance aseach situation is unique.52

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