This presentation addresses all aspects of Procurement and Tendering, including: Basic Principles of Tender Law, RFP's and Tendering, Procurement Models, drafting effective RFP's, as well as issues relating to Public Procurement.

1. Breakfast for the Mind: Issues with
Procurement & Tendering
Wednesday, May 25
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2. Tendering: Issues and Problems
Presenter: Lyle Brookes
Partner
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3. What is a Tender?
• A competitive selection process
• Seeks an irrevocable bid for a specified scope of work
• Bid Security
• Process replaces negotiation with competition
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4. Basic Principles of Tender Law
• Ron Engineering, SCC, 1981
• Contract A / Contract B
– Tender Documents = Offer
– Bids = Acceptance
• Bid Submissions are Contract A’s
• Award of Contract to do the work is Contract B
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5. Basic Principles of Tender Law (cont’d)
• Each Compliant Bid submitted is a Contract A
• The main terms of Contract A are in the tender documents
• Contract A protects the integrity of the bidding process
• Once you bid, you are in a Contract and bound by its terms
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6. Basic Principles of Tender Law (cont’d)
• Contract A only arises if bid submission is compliant with
tender documents
• A qualified bid is not compliant and does not create a
Contract A
• Contract A’s end when Contract B is awarded to the
successful bidder or all bids rejected
• Applies to the Prime Contractor – Sub‐contractor
relationship
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7. Owner Obligations
• Duty to follow express terms of Contact A
• Duty to treat all bidders fairly and equally
• Duty not to accept non compliant bid
• No negotiation (competition replaces negotiation)
• Duty to award Contract B
• No Bid Shopping
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8. Duty of Fairness
• Consider only compliant Bids
• Implied term of Contract A that owner treats all bids
fairly/equally and consistently
• Must apply assumptions equally – no unfair advantages
• Must disclose all operative terms and evaluation criteria – no
hidden preferences
• Treating all bidders fairly preserves integrity of bidding process
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9. Compliant Bids – MJB Enterprises
• Defence Contract to build a pumphouse and water distribution
system
• Sorochan lowest Bid, MJB next lowest
• Sorochan qualified bid by using 2 price structure for bid, native
material to back fill or $60 per linear meter if non native
material to back fill
• Tender said use only one price for linear water distribution
back fill
• SCC said Sorochan not compliant bid, and you can only accept
compliant bid
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10. More Fairness – Martel Building Ltd.
• National Capital Region Dept Public Works ‐ tender to lease space
• Martel bid, and bid was lowest
• Department did analysis for fit ups on Martel bid – increased costs
by $1M
• After analysis Martel bid not lowest
• SCC said implied term of Contract A to treat all bidders fairly and
equally – otherwise bidder incur costs on futile bid – won’t
participate
• A privilege clause reserving right not to accept lowest offer doesn’t
relieve owner obligation to treat bidders fairly and equally
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11. Privilege Clause
• Owner may not award to lowest bid or any bid
• Privilege clauses are enforceable
• Only one clause in Contract A, cannot be used to override whole of other
provisions or relieve owner from duty to act fairly
• Courts consider a nuanced approach to best bid,
• Cannot be used to accept non‐compliant bid or to evaluate bids on
undisclosed criteria
• Can be invoked if owner has a valid objective reason for rejecting lowest
bid.
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12. Discretion Clause
• Permits owner to waive minor irregularities and defects in an
otherwise compliant bid
• Only applies to non‐material defects or irregularities
– Cannot accept materially non‐compliant bid
– Reason: No Contract A arises
• Sole discretion does not preclude court review
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13. Discretion Clauses: Double N Earthmovers
• City Contract – Tender documents said all equipment to be
1980 or newer; required bidders to disclose serial numbers
and city license registration numbers
• Contract B awarded to Sureway, and told to use 1980 or newer
equipment Sureway subsequently used a 1979 unit but City
didn’t pursue
• Double N sued – SCC split 5‐4 and agreed Sureway was a
compliant bid
– Reason: missing information and older equipment did not materially
affect the price or ability to do the job
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14. Evaluation
• Owner is entitled to investigate reliability of information
provided by bidders
• No duty to allow bidder to reply to negative information
collected James A. Brown v. Caisse, Ont. SC 2009
• No duty to disclose weightings of criteria
• Post tender closing is not an opportunity to bid shop or
negotiate
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15. Extent of Duties – to Sub‐contractor
• No duty of owner to subcontractor or to JV team members –
Design Services, SCC 2008
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16. Mistake
• Rights of parties crystallize on submission of bid
• Risk of mistake in the calculation of the bid price is bidder’s –
cannot withdraw bid after the tender closes
• Mistake on the face of a a bid can crate uncertainty as to
price, so no Contract A (i.e. difference in price in numbers and
words)
• Owner cannot accept obvious mistake regarding price that is
apparent on face of tender
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17. RFP’s & Tendering: understanding and
managing the distinctions
Presenter: Tom Sides
Partner
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18. Procurement Models
• Request for Information (or Request for Expression of Interest)
(“RFI”)
• Request for Qualification (“RFQ”)
• Request for Proposals (“RFP”)
– Requests for Standing Offers
– Requests for Quotations
• “Hybrid” procurement model: elements of competition and
negotiation
• Tender
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19. RFI
• Provides information on procurement opportunity
• Ascertains market interest
• Does not contain all information proponent needs to provide
full response
• Responses to RFI are not used by owner to evaluate
proponents or subsequent procurement process (if any)
• Information provided by owner does not constitute implied or
express commitment
• Often used as a precursor to the issuance of an RFP/RFQ
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20. RFQ
• Outlines scope of project including proposed business
arrangements
• Addresses proposed proponent qualifications, due diligence
requirements and evaluation criteria
• Owner determines whether there is a market to produce
sufficient number of qualified proponents to produce a
competitive tender process or use an RFP
• Does not normally include draft pro forma contract
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21. RFP
• Key document in (non‐tender) procurement process
• Outlines: scope, evaluation criteria, main business/technical and
legal issues, often includes draft contract and provides rules of
selection process
• Owner usually reserves right (privilege clause): not to award
contract to lowest‐priced proponent, or at all; to conduct
negotiations with lowest‐priced proponents; to conduct negotiations
with one or more other proponents if negotiations with first choice
unsuccessful; engage in clarification process; cancel and reissue RFP;
and, to extend deadlines and amend procurement process
• If structured properly, it serves to tender an “opportunity to
negotiate”
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22. Hallmarks of a Tender . . . intention to
create contractual relations
• Contract A/Contract B
• Contract B is attached to procurement documents
• Typically, no negotiation of Contract B permitted
• Irrevocability of bid
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23. Hallmarks of a Tender (cont’d)
• Formality of procurement process
• Requirement for security deposit
• Existence of established timelines
• Tender documents describe substantially all of the rights of
parties
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24. Effect of a Tender
• Duty to follow express terms of Contract A
• Duty to treat all bidders fairly and equally
– Apply evaluation criteria evenly
• Duty to award Contract B
– But only materially compliant tender
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25. Effects of Tender (cont’d)
• Rights of parties crystallize upon submission of materially
compliant bid
– Latent error in Tender does not excuse Bidder from
performance
• No (or minimal) negotiation: competition replaces negotiation
• Owner and bidder can be liable for damages for breach of
Contract A
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26. RFP . . . differentiated from Tender
• Offer to negotiate generally not considered to give rise to
contractual relations
• RFP’s typically have a less defined scope of work and
contemplate negotiation
• Subsequent discussions and negotiations required regarding
fundamental details
• Tenders disguised as RFP’s will not escape Contract A analysis
• Labels are not determinative
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27. RFP . . . differentiated from Tender
(cont’d)
• Assume duty:
– of procedural fairness;
– to follow rules in RFP;
– not to negotiate with non‐compliant proponent
• Recommendation: draft as RFP but treat as if a Tender
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28. RFP – determined to be Tender
• Tercon Contractors, SCC, 2009
• RFP was issued; claim that Contract A was breached by
Province of B.C.
• Province breached its own RFP – owner breached Contract A
by awarding “alliance” to non‐eligible proponent
• “Contract A” arose because of intention to contract based on:
irrevocability, formal process, bid security, commitment to
build, specific scope of work, agreement attached, etc.
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29. Non‐compliant bids . . . is procurement
dead?
• Opportunity to negotiate with any or all bidders if there are no
compliant bids
– Can’t be colourable attempt to avoid “rules” under
Contract A
– Non‐compliant bid is essentially a counter‐offer which can
be accepted
– Cancel tender or simply approach one or all of unsuccessful
bidders to negotiate new terms?
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30. Why issue a Tender vs. RFP?
• If complete information available (esp. scope), Tender can be
lower cost method of procurement
• Lack of formality and rules . . . easier to run an RFP process?
• Negotiation result in more favourable agreement for Owner?
– Once preferred proponent selected . . . negotiation risk is
high
– Consider dual‐track negotiation
• RFP process more time consuming?
• Tender may be required, especially if public body
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31. Drafting Effective RFP
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32. Effective RFP – can application of
Tendering Law be minimized/avoided?
• Labels are not determinative (but don’t use “bidders”,
“tender”, etc.)!
• Intention critical: non‐binding invitation to enter into
negotiations? (substance vs. form)
• Preserve right to negotiate
• Can include form of contract, but state that Owner will
evaluate Proposals based on exceptions made to it
• Use disclaimer language – owner reserves right to cancel RFP
process at any time
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33. Effective RFP (cont’d)
• Proponents acknowledge undertaking expenditures entirely at
own risk
• State that RFP is not a Tender call (and avoid hallmarks of
Tender)
• Describe process to be followed . . . and follow it!
• Likely that duty of fairness applied
– Consider business ramifications even if not challenged
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34. Public Procurement
Presenter: Craig McDougall
Partner
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35. Public Procurement – Trade Agreements
• Agreement on Internal Trade (AIT)
• Trade, Investment and Labour Mobility Agreement (TILMA)
• New West Partnership Trade Agreement (successor to TILMA)
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36. AIT Principles
• Reduce and eliminate barriers to free movement of services,
goods, investments and people within Canada. Establishes
framework that will ensure equal access to procurement for all
Canadian suppliers.
• No discrimination. “Treatment no less favourable than the
best treatment it accords to its own suppliers”. Examples:
– Conditions based on location
– Biasing of technical specifications
– Price discounts to favour particular suppliers
– Economic benefits evaluation criteria
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37. AIT ‐ Scope
• Scope: Governments, MASH, Crown Corporations
• Thresholds:
– Gov’t Entities: Goods‐$25k; Services/Construction‐ $100k
– Designated MASH: Goods/Services ‐ $100k; Construction ‐ $250k
– Designated Crown Corps: Goods/Services ‐ $500k; Construction ‐ $5
Million
• Exceptions include: Emergencies; confidentiality; security or
order or protection of life or health; technical compatibility /
recognizing exclusivity
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38. AIT – Procurement Procedures
• Call for tenders only through electronic tendering system
(www.purchasingconnection.ca (Alberta), MARCAN),
predetermined daily newspapers, or source lists. AIT sets out
the minimum requirements to be included in the notice.
• Tender documents must clearly identify:
– The requirements of the procurement
– Criteria used in evaluation of bids
– Methods of weighting and evaluating the criteria
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39. AIT – Complaints/Enforcement
• AIT has a complaints procedure that encourages informal
dispute resolution, provides for the potential for a Province to
make representations on a supplier’s behalf, or potentially
allow a supplier to advance its own dispute
• According to the AIT Secretariat, there have been 51 disputes
under AIT. According to the Alberta government’s website
there have been 34 complaints by Albertans, and 10 against
the Alberta Gov’t
• Potential monetary penalties range from a maximum of $250k
to $5million depending on the jurisdiction involved
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40. TILMA/NWPTA
• TILMA is an agreement between BC and Alberta that
supplements but does not replace AIT.
• In the event of inconsistency between AIT and TILMA, the
provision more conducive to liberalized trade, investment and
labour mobility prevails.
• TILMA has been superseded by the NWPTA, which brings
Saskatchewan into the fold.
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41. NWPTA ‐ Scope
• Thresholds (lower than under AIT):
– Gov’t Entities: Goods‐$10k; Services ‐ $75k; Construction‐
$100k
– MASH: Goods/Services ‐ $75k; Construction ‐ $200k
– Crown Corps: Goods ‐ $25k; Services ‐ $100k; Construction
‐ $100k
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42. NWPTA ‐ Scope
• Scope: gov’t entities including departments, ministries,
agencies, boards, crown corporations and MASH. Exceptions
for Saskatchewan until July 1, 2012. Procurement provisions
do not apply to non‐governmental bodies that exercise
authority delegated by law.
• Exceptions to obligations under the procurement provisions
are similar to AIT
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43. NWPTA Disputes and Remedies
• Parties are to consider option to improve the dispute
resolution process for procurement
• Maximum monetary award is $5 million, but the monetary
award provisions do not apply to procurement until the
dispute resolution process is determined by the parties
• Must choose between the AIT process and the NWPTA process
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44. Resources
• Alberta International and Intergovernmental Relations website
has a section for domestic trade agreements:
(http://www.international.alberta.ca/947.cfm)
• AIT Secretariat website: (http://www.ait‐aci.ca/index_en.htm)
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45. Questions?

46. Thank you for Joining Us
Craig McDougall 780.423.7398 e: craig.mcdougall@fmc‐law.com
Tom Sides 780.423.7138 e: tom.sides@fmc‐law.com
Lyle Brookes 780.423.7164 e: lyle.brookes@fmc‐law.com

47. The preceding presentation contains examples of the kinds of
issues companies dealing with procurement and tendering
could face. If you are faced with one of these issues, please
retain professional assistance as each situation is unique.