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Procurement Perspectives: Qualified or conditional bids create concerns for governments

Stephen Bauld
Procurement Perspectives: Qualified or conditional bids create concerns for governments

A “qualified bid” or “conditional bid” is a bid that introduces some condition not authorized by the municipality into the offer to supply.

For instance, a tender may be put out for the supply of widgets. If a bid comes back that the offeror will set widgets at $1.50 per unit to the municipality, “provided that all widgets are purchased before Sept. 1,” a requirement not contemplated in the request for tender, then the bid is a qualified one.

In Canada, the normal practice is to reject any qualified bid as being non-compliant.

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 Federal Acquisition Regulation permits the deficiency in 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, or the bid, or work an injustice on other bidders. A condition goes to the substances of a bid where it affects price, quantity, quality or delivery of the item 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 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.

Hear again one returns to what is considered 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 that runs counter to getting the municipality the lowest cost is inconsistent with the very reason for requesting 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.

In relation to 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 may itself 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 problem raised by bids that contain some “minor irregularity” were discussed in previous columns.

However, I would note that many municipalities and other government purchasers retain an expressed right to clarify and admit and audit such bids.

The following provision is broader than most, but will confer some idea of the nature of the privileges concerned:

The City may waive compliance with any minor requirement governing the submission of bids, including (but not limited to) attend any meeting, inspect any sight or thing, provided that in so doing the city shall not unfairly prejudice any other bidder.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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