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November 21, 2012

Bid Protest Bulletin | Paul Emanuelli

Municipal “clarifications” constitute bid repair

In its May 2008 decision in Maystar General Contractors Inc. v. Newmarket (Town), the Ontario Superior Court of Justice found that the municipality improperly corrected a mathematical error in a tender and held the municipality liable for awarding a contract to a non-compliant bidder.

The case involved a tender call for the construction of a recreational facility. The plaintiff, Maystar General Contractors, was an unsuccessful bidder. It alleged that the contract was awarded to a non-compliant competing bidder. It sued for $3.3 million in lost profits. Newmarket, the defendant municipality, argued that the selected tender was compliant and that its mathematical corrections were permitted within the tendering rules. The court disagreed, finding that the bid price in the selected tender was uncertain and that the post-bid “clarifications” and “corrections” amounted to improper bid repair.

As the court explained, the inconsistent pricing information in the selected tender was capable of two different interpretations, thereby leading to uncertainty with respect to the tendered price:

Paul Emanuelli

Bid Protest Bulletin

Paul Emanuelli

In my view, Bondfield’s price as contained in its bid was uncertain. Given that Bondfield made two errors, one in respect of the GST amount and the other in respect of the total price, it was not possible from reviewing Bondfield’s Bid Form to tell where its error lay. On the one hand, if the Stipulated Price which Bondfield submitted ($33,000,528.00) was the correct price at which it was prepared to do the work then the 7 per cent GST would equal $2,310,036.96 (not $2,346,960.00 as submitted) and the total price would be $35,310,564.96 (not $35,874,960.00 as submitted). On the other hand, if the GST and the total price sums submitted by Bondfield were correct, then the stipulated price would have been $35,528,000.00, not $33,000,528.00 as submitted. The result, therefore, of Bondfield’s error is that it is not possible to determine whether its Stipulated Price was $33,000,528.00 or $33,528,000.00. Accordingly, the price as submitted by Bondfield in its bid was uncertain.

This failure to submit a clear offer on price was a material mistake that rendered the bid non-compliant and incapable of acceptance. The court determined that this type of mistake could not be properly cured by a post-bid “correction” or “clarification” and that the municipality’s post-bid rectification amounted to bid repair.

In September 2009 the Ontario Court of Appeal upheld this decision, noting that the lower court had correctly concluded that the error in the pricing information was a material mistake that could not be fairly corrected after the submission of bids:

The appellant submits that the application judge erred by treating a price discrepancy as an automatic non-compliant bid and that the discrepancy in the presentation of the price figures by Bondfield in its bid did not materially affect the price itself, and gave Bondfield no unfair advantage within the tender process.

There is no merit in this submission...[T]he reason the price was materially affected in this case...was because there was uncertainty as to which price was the intended bid price until the correction was made. That after the fact correction gave Bondfield an unfair advantage over other bidders and was not compliant with the terms of the tender documents.

The Court of Appeal therefore dismissed the appeal and ordered costs against the appellant. As this case illustrates, purchasers are constrained in the post-bid indulgences that they can grant bidders who make mistakes in their tender submissions. Since permitting post-bid corrections to defective bids can constitute improper bid repair, purchasers who grant such indulgences do so at their peril.

This article is extracted from his Government Procurement textbook published by LexisNexis Butterworths. Reach Paul at paul.emanuelli@procurementoffice.ca.

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