Case Comment: Provincial Fence Products v Town of CBS

A new decision from the Supreme Court of Newfoundland and Labrador revisits the classic issues of public bodies, cancelled tenders, privilege clauses, and allegations of bid shopping.

In Provincial Fence Products Ltd. v Town of Conception Bay South, 2013 NLTD(G) 87, a thumbnail sketch of the dispute can be drawn as follows:

  1. A call for tenders for municipal park and playground equipment was issued.
  2. The lowest bid was non-compliant for failure to include a bid bond.
  3. The next highest bidder, Provincial Fence, was confident it would get the job.
  4. All the bids were over the internally projected budget, and the original tender was cancelled and the project re-tendered with some changes.
  5. Provincial Fence expressed the opinion that the Town’s budget was unrealistic and that they had enough money in the relevant municipal fund to cover the project as bid (true), and noted that there seemed to be a clear preference for the non-compliant low bidder, as their original bid was marked up and seemed to form the basis for the new re-tendered project, and the new tender call included on its face in bold print a reminder to include a bid bond.
  6. Provincial Fence brought an action asserting that they should have been awarded the contract.

This decision is useful for two reasons. First, it contains a nice review of many of the leading Supreme Court of Canada cases on tendering (commented on earlier in the material on this site) and their subsequent application in tender dispute decisions from Newfoundland and Labrador. Second, it illustrates a primary question to ask when considering a challenge of a cancelled tender, especially if it was cancelled by a public body:

Why was the tender cancelled?

In Provincial Fence, the Judge found as follows from the evidence presented:

“Here, the public body determined that all the bids exceeded its budget. There were no post-closing discussions or negotiations with the bidders. Instead the tender was cancelled and a new tender advertised for a different scope of work.

[The Plaintiff] bears the onus to demonstrate that the Town’s conduct failed to uphold the integrity of the tendering process in its decision to cancel Tender 09-11. To the contrary, I find that the evidence establishes that the Town acted in good faith in its call for tenders for playground equipment. The testimony . . . and the documentary record relating to their email exchanges and Town and Committee meeting minutes all support the overriding budgetary considerations. They were accountable to the Town Council for appropriate spending in the context of the Town’s budget.”

On this basis, the Plaintiff’s claim that the tender shouldn’t have been cancelled and it should have gotten the contract was not made out.

In the wake of M.J.B. and a host of lower court cases brought by low bidders who were passed over in favour of higher bidders or who were otherwise victims of bid shopping or some other breach of the integrity of the tender process, there was for many years a cottage industry of frustrated bidders who were consistently successful in suing for “expectation damages” for lost profit as a result of the breaches by the owners.

So, here’s the moral of Provincial Fence and other more recent cases like it: It’s not so easy anymore.

If a call for tenders contains a privilege clause, and the tender is in fact cancelled for what appear to be good faith reasons, such as bids which are clearly over-budget, it is not likely that the frustrated low bidder will have any claim to bring simply on the basis of the cancellation.

This said, good old-fashioned bid shopping is still generally going to constitute a breach of a tender contract and is still notionally bad for the economy as it will tend to result in higher overall costs, albeit many modern tender calls take a more nuanced approach to pre-tender discussions with bidders.

If you are planning a call for tenders, are planning to submit a tender, or are engaged in a dispute regarding a tender, you should seriously consider getting some advice from a professional on the particulars of your contract and the issues arising in your situation.

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