MMCD Webinar Series presents: Good Tendering Practices After Tercon Follow MMCD for the latest industry news and updates Website : mmcd.net 1
Good Tendering Practices After Tercon MMCD Webinar March 23, 2011 - Vancouver Presented by: Karen Martin, Partner Tel: 604-691-6455 Email: karen.martin@fmc-law.com Follow MMCD for the latest John S. Haythorne, P.Eng., Partner industry news and updates Tel: 604-691-6456 Email: john.haythorne@fmc-law.com 2
The Challenge • Tender/RFP law is constantly developing which creates uncertainty • Legal rules are strict • The risks: – High risk of claims/litigation – Damage awards can be large – Failure to reap the benefits of a good competition for the project 3
Sources of Tender Law • Common law • Legislation – government procurement • Treaties – AIT, TILMA, NWPTA • Bylaws, policies, manuals, etc. 4
Basic Principles of Tender Law • Contract = offer + acceptance on the same terms • Contract terms can be express or implied Ron Engineering: • Tender documents = Offer Bids = Acceptance Contract A’s (bid contracts) • Award to one bidder creates Contract B for the work (i.e. the construction contract) 5
Basic Principles of Tender Law • Contract A may arise with each bidder when a compliant bid is submitted – i.e. if acceptance is on the terms of the offer in the tender documents • Main terms of Contract A are in the tender documents • Once the bids are in, you are in a contract! • Breach of Contract A results in an award of damages = lost profits on the job ($$$) 6
Duty of Fairness Which is not a component of the duty of fairness? • Treat all bids evenly consistently and apply assumptions equally • Disclose all operative terms and evaluation criteria – have no hidden preferences • No bid shopping • Give every bidder an equal chance of winning 7
RFPS • TENDER – seeks an irrevocable price (with bid security) for a detailed scope of work + a settled form of contract • RFP – an invitation to submit proposals with differing scopes and negotiations to follow • What’s the difference? True RFPs have an undefined scope of work and contemplate negotiation • BUT – the same basic duties apply • Follow the rules in the RFP; don’t negotiate with a non - compliant proponent, etc. 8
Tercon – Some Facts • Design-Build RFEI to get a shortlist of 3 proponents • RFEI required details of the team • 6 responses – Brentwood was ranked 5 th • Before finalizing the shortlist, BC decides to re-load • Change to alliance model – RFP issued to 6 original proponents – only they can submit a proposal • RFP – Formal process: security, irrevocability, Contract B • Change in team requires written notice. BC can formally approve a change 9
Tercon – Some Facts • Brentwood notifies BC of its JV with Emil Anderson. BC calls to say you must submit the proposal in Brentwood’s name. No formal written response • Brentwood calls Emil Anderson a “major member” of team and “major subcontractor” in its proposal • Brentwood – $24 million and supportive of alliance model; Tercon – $26 million and skeptical of alliance model • Brentwood wanted the Contract B to be with the JV, but BC said no, it must be with Brentwood • Tercon sues BC for awarding to an ineligible entity 10
Tercon Exclusion Clause • Except as expressly and specifically permitted in these Instructions to Proponents, no Proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a Proposal each Proponent shall be deemed to have agreed that it has no claim 11
Tercon - The Issues for the SCC, 2010 1. Did a Contract A arise under this RFP? 2. Should Brentwood have been allowed to participate in the RFP? 3. If not, was Tercon’s claim barred by the exclusion clause? 12
Tercon - The Scorecard BCSC – 1 judge for Tercon BCCA – 3 judges for BC SCC – 5 judges for Tercon – 4 judges for BC Total – 6 judges for Tercon – 7 judges for BC BUT Tercon wins 13
Tercon v. BC, BCSC, 2006 • A Contract A was created by the RFP based on an intention to enter into contractual relations • A contract was actually awarded to an entity that was in fact a JV who had not pre-qualified and therefore was ineligible • BC was involved in a cover up and its conduct was egregious in not following its own process • Where the owner acts so unfairly, it can not rely on an exclusion clause – it’s fundamental breach, or “participating” in the clause is unclear and so not enforceable, or it’s not fair • Damages = $3.3 million 14
Tercon , BCCA, 2007 • Only issue was application of exclusion clause • Language of the clause is so clear and unambiguous that it is inescapable that it was intended to cover all breaches including fundamental breaches • “Participating” clearly means involvement in the process • Tercon is sophisticated. Industry can refuse to bid 15
SCC - Did a Contract A Arise? • TJ rightly conducted a detailed analysis of the parties’ dealings and reviewed in detail the RFP provisions. Contract A arose: – a specifically defined project – a closed and specific list of eligible proponents – proposals were evaluated against specific criteria – a constrained negotiation, not about fundamental details – an intent to create contractual relations; although not a “classic” Contract A 16
SCC - Eligibility of Brentwood • Ministerial approval limited participation in the RFP to bidders who participated in the RFEI • RFP said only the 6 proponents selected in RFEI were eligible and had a mechanism to determine a team’s qualification to bid if there was a material change to a proponent 17
SCC - Eligibility of Brentwood • Brentwood’s bid was in fact on behalf of a JV with EAC; BC knew this; and this was a material consideration • Allowing a JV to bid gave B a competitive advantage over other bidders and BC took steps to obfuscate reality • BC breached the express eligibility terms of the RFP and the implied duty to act fairly to all bidders 18
SCC - The Exclusion Clause The Majority • Special commercial context of tendering – courts must protect the integrity and business efficacy of the process – especially in public procurement • Only compliant bids can be considered • It makes no sense that BC could avoid liability for ignoring the express term regarding eligibility on which the entire RFP was premised, so clear language would be necessary to do this 19
SCC - The Exclusion Clause The Majority • Rejects the argument that Tercon is sophisticated and agreed to the clause – this ignores the meaning of the clause and the fact that BC can draft clear and comprehensive clauses when it wants to • Clause has a meaning – but when a defect in BC’s adherence to the process is such that BC is acting completely outside the process, the clause doesn’t operate 20
SCC - The Exclusion Clause The Majority • BC did not specifically reserve right to accept bid from an ineligible bidder or to unilaterally change the rules of eligibility • Intention not to gut the eligibility requirements or render meaningless the Minister’s approval – to the competitive disadvantage of other bidders and disguising the true state of affairs • BC’s conduct strikes at the heart of the integrity and business efficacy of the tendering process 21
SCC - Exclusion Clause The Minority • Court has no discretion to refuse to enforce a valid exclusion clause unless there is a paramount consideration of public policy sufficient to override the public interest in freedom of contract • A fair and transparent bidding process is based on the presumed (implied) intent of parties. Rarely will the court relieve a party from the bargain it made 22
SCC - The Exclusion Clause The Minority • To conclude that by BC’s conduct the process ceased to be the RFP process contemplated is “a strained and artificial interpretation” • Clause not unconscionable – No unequal bargaining power – No policy reasons – other remedies for Contract A were available: specific performance or injunction – Ministry’s conduct wasn’t so bad as to justify judicial interference 23
Tercon Lessons for Good Practice • Pay attention to statutory project approvals • Don’t use out of date procurement documents – you are drafting a contract and can be held liable • Don’t draft an unnecessarily complex process – technical requirements for convenience can cause legal problems • Follow the process strictly – including in RFPs • Get early legal advice if compliance/process issues arise • Be cautious with changes to bidder teams • Exclusion clauses may work, but litigation results are uncertain 24
MMCD Instructions to Bidders 3. MUST be in sealed, marked envelope and received by closing Time. Late tenders will be returned unopened 5. MUST be on the Form and signed, with Bid Security MUST include Appendices 25
MMCD Instructions to Bidders 5.4 Tenders with qualifications or omissions making comparison difficult MAY be rejected 6. Alternative bid MUST be in addition to base bid and owner may only accept alternative of the bidder with the best base bid 12. Amendments after closing must not be considered 26
Recommend
More recommend
