Enhance your legal knowledge and receive an overview of the fundamentals of tendering & procurement law. Reviewing the common risks involved with the procurement & tendering processes, panelists will address mechanisms to avoid, reduce and control these challenges. This seminar will also discuss best practices for preparing and responding to request for tenders/requests for information and provide an update on recent case dealings.

1. T15: A CONSTRUCTION LAW UPDATE: EMERGING
TRENDS AND COMMON PITFALLS
THURSDAY, FEBRUARY 25, 2016
10:30AM-12:30PM
Speakers:
Seema Lal, Principal, Shapiro Hankinson & Knutson Law Corporation
Marc MacEwing, Associate Counsel, Shapiro Hankinson & Knutson Law Corporation
Vanessa S. Werden, Associate, Shapiro Hankinson & Knutson Law Corporation
SPONSORED BY

2. TENDERING & PROCUREMENT
BASIC PRINCIPLES
Seema Lal
Buildex 2016 – February 25, 2016

3. TENDERING & PROCUREMENT
BASIC PRINCIPLES
 Is it a tender?
 Obligations of Tendering Authority
 Privilege/Discretion Clauses

4. IS IT A TENDER?
 Competitive procurement process
 Period of irrevocability
 Process replaces negotiation with competition

5. CONTRACT A/CONTRACT B
 The fundamental principle of the law of tendering for
construction in Canada is that that method of contract
procurement involves two stages of contractual relationships:
R v. Ron Engineering & Construction (Eastern) Ltd.
a) Contract A, which arises between the tendering authority and each
“materially compliant” bidder, the terms of which are generally as set
out in the tendering documents; and
b) Contract B, which is the tendered contract entered into between the
tendering authority and the successful bidder.
Note: Contract A only arises if bid submission is compliant with
tender documents (MJB Enterprises v Defence Construction)

6. TENDERING AUTHORITY OBLIGATIONS
 Duty to follow express terms of Contract A
 Duty to treat all bidders fairly and equally
 Duty not to accept non-compliant bid and duty not to accept bid
that has an obvious mistake regarding price
 No negotiation with individual bidders
 No bid shopping
 Note: No duty owed by owner to subcontractor

7. DUTY OF FAIRNESS
 Consider only compliant bids
 Treat all bids fairly/equally
 Must disclose all evaluation criteria – no hidden preferences

8. DAMAGES
 The Contract A/Contract B analysis means that both the
tendering authority and bidders may be liable for damages if, for
example:
a) an owner purports to award a construction contract to a materially
non-compliant bidder in preference to the lowest compliant bidder;
or
b) a materially compliant bidder refuses to sign a construction
contract and proceed with the work after being awarded the
contract.

9. PRIVILEGE & DISCRETION CLAUSES
Privilege Clauses
 The lowest or any tender will not necessarily be accepted
• Can be invoked if tendering authority has valid objective reason for
rejecting lowest bid
 Price + other criteria + best interest can be taken into
consideration
• However, cannot be used to evaluate bids based on undisclosed
criteria
 Limited or no liability for treatment of tender (Tercon)

10. PRIVILEGE & DISCRETION CLAUSES
Discretion Clauses
 Permit tendering authority to waive minor defects in a bid that
is otherwise compliant
• However, material non-conformance with tender requirements
cannot be waived

11. PRACTICE POINTS FOR TENDER
SUBMISSIONS
 Have a basic knowledge of tendering law
 Read and understand the totality of the procurement
documents
 Clarify pre-bid questions using designated process
 Quality assurance for tender preparation
 Comply with all tender requirements

12. Common Problems in the Drafting
of Tender Documents
J. Marc MacEwing
Buildex 2016 – February 25, 2016

13. POOR DRAFTING
- Inconsistent provisions
- Inclusion of Contract B provisions
- Unclear or ungrammatical wording
- Inadequately worded privilege clauses

14. Counter-productive “philosophy”
- Unreasonable privilege clauses
- Complicated tender procedures
- Mixing of negotiation with tendering

15. Approaches to tendering
- Lack of knowledge of tendering law
- Lack of care in setting, understanding and following
tender “rules”

16. Practice points for tender submissions
1. Have a basic knowledge of tendering law
2. Read and understand the totality of the procurement
documents
3. Clarify pre-bid questions using designated process
4. Quality assurance for tender preparation
5. Comply with all tender requirements

17. Case Law Update
Vanessa S. Werden
Buildex 2016 – February 25, 2016

18. Tercon Construction Ltd. v. British
Columbia (Transportation and Highways)
2010 SCC 4
• The Court held that the particular exclusion clause
contained in the request for proposals (“RFP”) did not
permit the Ministry to accept a non-compliant bid.
• The Court also affirmed the continued application of the
obligations imposed on the tendering and procurement
process by the courts (see Ron Engineering).

19. Tercon Construction
• Following Ron Engineering, three key principles in the law
of tendering emerged:
(a) Only a compliant tender can be accepted by an
owner;
(b) The lowest compliant tender should be accepted;
and
(c) The owner owes bidding contractors a duty of
fairness in analyzing the tender bids.

20. Tercon Construction
• The application of the Ron Engineering principles was
modified by the inclusion of exclusion clauses or
“privilege” clauses by owners in tendering documents.
• However, an exclusion clause does not give an owner
the ability to accept any bid; a decision to accept a bid
other than the lowest bid must be done in good faith
and based on objective reasons

21. Tercon Construction
• The Supreme Court of Canada's decision in Tercon SCC
leaves open the possibility for a properly crafted exclusion
clause to permit an owner to breach a fundamental term
of Contract "A", such as the requirement to only accept a
compliant bid.
• However, the Court stressed that such a result would
require a clear and unequivocal exclusion clause.

22. Bhasin v. Hrynew, 2014 SCC 71
• This decision of the Supreme Court of Canada
represents a very significant development in the law of
contract in this country, which applies equally to
tendering and other construction-related types of
contract.
• The Court confirmed as a new principle of Canadian
law that all contracting parties have a duty to perform
their contractual obligations honestly, based on the
existence of an implied term of good faith.

23. Bhasin v. Hrynew
• The decision reflects the evolution of the
common law to favor “open” business
behavior.
• The requirement for honesty in existing
contractual relations is not totally new, but was
previously recognized in the context of pre-
contractual misrepresentation.

24. Bhasin v. Hrynew
• The Court relied in part on the fact that Canadian common law
has previously identified the existence of a duty of good faith in
certain specific contractual contexts, including tendering:
[56] This Court has…recognized that a duty of
good faith, in the sense of fair dealing, will generally
be implied in fact in the tendering context. When a
company tenders a contract, it comes under a duty of
fairness in considering the bids submitted under the
tendering process, as a result of the expense incurred
by parties submitting these bids…

25. How has Bhasin been applied in the
context of tendering?
• Recently cited in a tendering case in the Court of
Queen’s Bench of Alberta in Elan Construction
Limited v. South Fish Creek Recreational
Association, 2015 ABQB 330.
• Key take-away: The “duty of good faith” requires more
than honesty. It requires, particularly in the tendering
context, “honest, candid, forthright or reasonable
contractual performance”.

26. So what does it all mean?
• In the tendering context, Bhasin confirms the elevated
standard of good faith and a duty to act honestly in the
performance of contractual obligations.
• The principle of good faith will have different
implications in the context of a long-term contract of
mutual cooperation than it will in a more singularly
transactional exchange, such as a tender.

27. T15: A CONSTRUCTION LAW UPDATE: EMERGING
TRENDS AND COMMON PITFALLS
THURSDAY, FEBRUARY 25, 2016
10:30AM-12:30PM
Speakers:
Seema Lal, Principal, Shapiro Hankinson & Knutson Law Corporation
Marc MacEwing, Associate Counsel, Shapiro Hankinson & Knutson Law Corporation
Vanessa S. Werden, Associate, Shapiro Hankinson & Knutson Law Corporation
SPONSORED BY