Governments continue to see several issues related to the amount of construction RFPs and tenders that receive a “qualified bid” or “conditional bid”.
This is known in the industry as a bid that introduces some condition not authorized by the municipality into the offer of supply.
For instance, a tender may be put out for widgets. If a bid comes back stating that the offer will sell widgets at $1.50 per unit to the municipality, “provided that all widgets are purchased before September 1” (a requirement not contemplated in the request for tender), then the bid is a qualified one.
Typically, the terms of the tender will provide:
Qualified or conditional bids (i.e., bids which are submitted subject to a caveat added to the Form of Tender or under a covering letter or alterations to the Form of Tender) will be rejected unless the bid documents specifically permit such a qualification or condition.
In contrast, section 14,404-2(e) of the U.S. Federal Acquisition Regulation permits the deficiency the bid to be cured:
A low bidder may be requested to delete objectionable conditions from a bid provided the conditions do not go to the substance, as distinguished from the form, of the bid, or work an injustice on other bidders. A condition goes to the substance of a bid where it affects price, quality, or delivery of the items offered.
The difference in approach is partly the result of the Ron Engineering line of case law. If the condition is removed, there is no reason for the municipality to reject the offer that has been made.
Moreover, it can be argued that there is really no basis on which any other bidder can complain that it is being treated unfairly by allowing the low bidder to remove a condition, even where it does affect the price, quantity, quality, or delivery of the items offered.
The low bidder is still held to its price and since it was the low bidder in any event within the context of the tender, once the condition is removed it receives the contract by reason of being the low bidder. Here again one returns to what we consider to be the basic flaw in relation to the law of tender: the goal of using the tender is to obtain the lowest cost source of supply (there may be doubts as to whether tenders lead to such a result, but that is nevertheless the goal). Any rule of contract law which runs counter to getting the municipality the lowest cost is inconsistent with the very reason for requiring the use of a tender in the first place.
However, there are also commercial concerns that militate in favour of the Canadian approach. Conditional offers present a risk of confusion within the bidding process. Municipalities need to know that they are comparing like with like.
Before leaving the subject of conditional bids, it is worth noting that many municipalities reserve a right under the terms and conditions of tender “to accept bids conditionally”. Generally, provisions of this type are taken to mean that the municipality itself may impose conditions at the time when accepting a bid, not that it is reserving a right to consider bids submitted subject to some qualification.
The problems raised by bids that contain “minor irregularity” are sometimes the bigger issue when it comes to “The Law of Public Procurement”.
I do not need to go into the entire set of rules related to the law of procurement beyond saying that many municipalities (and other government purchasers) retain an expressed right to clarify and admit such bids. Different procurement documents have several types of privileges clauses.
Stephen Bauld, Canada’s leading expert on government procurement, is a member of the Daily Commercial News editorial advisory board. He can be reached at stephenbauld@bell.blackberry.net.
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