January 9, 2013

Bid Protest Bulletin | Paul Emanuelli

Not all math errors are fatal to bid validity

In its July 2009 decision in Whitehorse (City) v. Ketza Construction Corp., the Yukon Territory Supreme Court determined that a low bidder’s bid was substantially compliant and capable of acceptance notwithstanding the fact that it contained a mathematical error.

The case involved a municipal tender call for groundwater well contractors. The municipality sought a declaration that the bid was non-compliant and incapable of acceptance. The low bidder opposed the application, arguing that it was substantially compliant. The Court held that in order to be substantially compliant, the bid had to be certain with respect to price:

In order to be substantially compliant, a bid must be certain with respect to price. Counsel for the City and TSL submitted that the Ketza bid is uncertain as to price because of the mathematical error in the GST calculation and that it is therefore materially non-compliant. While acknowledging that there is no evidence of mischief, they also raise the issue of potential for mischief, on the basis that, in a hypothetical case, a party could put in the low bid with a similar mathematical error and then, if circumstances changed, refuse to sign Contract B because they “mistakenly” bid too low.

In my view, the principles to be applied are not in great dispute. It is the facts that ultimately determine the outcome in these cases.

The Court then considered whether the mathematical error created uncertainty with respect to price. The Court distinguished the facts from the Maystar General Contractors Inc. v. Newmarket (Town) decision, which had found that a mathematical error in that bid had created price uncertainty that was fatal to the bid and could not be properly corrected through a “clarification”. In this case, the mathematical error did not undermine the certainty of price and the municipality was therefore within its rights to accept the bid if it elected to do so:

In my view, the City is entitled, but not obligated, to accept the Ketza bid. The Ketza bid is substantially compliant for the following reasons:

— The Total All Items is certain. It is, unlike in Maystar, clearly stated.

— The GST calculation is superfluous and not the operative part of the tender for “Contract Award Purposes.”

— There is no evidence of mischief.

I find that the Ketza bid is not materially non-compliant in applying the test in Graham Industrial Services for the following reasons. The GST calculation is not an essential requirement for contract award purposes and it was treated as an apparent and obvious error that had no effect on the City’s evaluation of the two bids. It was appropriate for the City’s Engineering Projects Officer and the Director of Operations to follow the practice of evaluating the Total All Items amount from each bidder.

The City has a privilege clause which permits them to accept a compliant (but less-than-perfect) bid.

As this case illustrates, the assessment of substantial compliance can be a complex fact-specific analysis that considers the particular tender call terms and the specific nature of the irregularity in question. In this instance, the mathematical error was not significant enough to create uncertainty with respect to price. The bid in question was therefore deemed “substantially compliant” and, if the purchaser so desired, capable of acceptance. When assessing tender compliance, much will turn on the specific facts of the specific situation.

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

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