In its decision in the case of Cardinal Construction versus the City of Brockville, the Ontario High Court of Justice ruled that cable markings on diagrams failed to properly highlight potential issues in a sewer and watermain construction contract. Owners are required to disclose material information about tendered contracts that could influence bidders’ decisions to bid or the amount of money they quote.
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In its decision in Cardinal Construction Ltd. v. Brockville (City), the Ontario High Court of Justice held that the owner’s external engineers owed a duty to care to bidders to ensure the accuracy of the information disclosed in a tender call.
The case dealt with a contract for the reconstruction of sewers and water mains in the city of Brockville, Ont. Performance issue arose. The contractor sued, alleging that the city and its advisors had failed to properly disclose relevant information in relation to the project. The contractor maintained that “cable” markings on the relevant diagrams failed to properly highlight potential issues regarding the presence of a concrete duct structure and the complications that this could present in performing the work. The court agreed.
As this case illustrates, an owner is typically under a duty to disclose material information about the contemplated contract to all bidders. The failure to do so can create liabilities, give rise to litigation and cause significant problems in contract performance.
In fact, the institution issuing the tender call can be found liable for failing to meet its disclosure duties, even when the information is prepared by its external advisors. In this case the court also held that engineers preparing tender call documents for construction projects have a “responsibility to ensure that the information in the tender documents is correct and complete” and that the engineer “must disclose in the tender documents all material information in his possession in order to enable the contractor to prepare a proper bid”. The court also articulated the following rules for engineers who are advising owners in the preparation of a tender call:
(a) The engineer (Kostuch) who prepares tender documents owes a duty of care to tenderers, for whose use the documents are prepared, who are expected to rely upon the information contained therein.
(b) The duty is to exercise reasonable care that the information presented in the tender documents reflects with reasonable accuracy the nature of the work and its factual components, so as to enable the contractor to prepare a proper bid.
(c) If the engineer has not verified specific information presented, he has a duty to inform bidders in clear terms that he does not vouch for its accuracy so as to put the bidder on notice that he must himself investigate the doubtful element.
(d) Whether or not Kostuch had a duty to provide information about the nature of the Bell installation, once having undertaken to give information about it, Kostuch had a duty to bidders to do so with reasonable care because it knew the information would be relied upon.
(e) Having learned during the tender period that the Bell installation was concrete duct structure, and neither cable nor conduit, Kostuch had a duty to bidders to inform them of the true fact.
While these principles were articulated in the context of the engineer’s responsibilities in relation to the construction industry, they provide guidance across all industries with respect to the potential disclosure duties owed by an owner and its advisors during a tendering process. Owners and their external advisors should therefore remember the Cardinal Rule and ensure that they disclose material information about the tendered contract that could impact a bidder’s decision to bid or influence the amount that the bidder quotes in its tender. The failure to do so can give rise to significant post-award disputes and legal claims.
This article is extracted from Emanuelli's Government Procurement textbook published by LexisNexis Butterworths. Reach Paul at paul.emanuelli@procurementoffice.ca.
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