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Procurement Perspectives: Reserved privileges may create issues for contractors

Stephen Bauld
Procurement Perspectives: Reserved privileges may create issues for contractors

The reservation of a general right in favour of the contracting authority to reject any tender, and more specifically, not to accept the lowest tender is quite probably the privilege of general scope most frequently encountered in Canadian tender practice.

The failure to include a privilege clause allowing the contracting authority the discretion to reject a low bid can significantly compromise the latitude allowed to that authority to act in its own best commercial interest.

For instance, in Friesen v. City of Winnipeg, a request for tenders was issued for the provision of food and beverage services at parks and recreation facilities in Winnipeg. The request was broken into six packages, one of which involved canteen concessions for two pools and seven arenas and concession rights at golf courses, the zoo and other locations.

The defendant (the city) ultimately awarded the contract for all six packages to one supplier, even though the plaintiff’s bid with respect to the canteen concession was superior to the bid of that supplier. After the bids were opened, the responsible officers of the city’s parks and recreation department met and recommended the award of the contract for all six packages to the successful bidder because it would provide a significant cash infusion and because that bid was predicated on receiving all six packages or nothing.

The terms of the tender did not include the standard privilege giving the city the right to reject any bid or the lowest bid.

Moreover, before submitting a bid, the plaintiff had confirmed that she could bid on one package only. The plaintiff argued by breaking down the tender request into six distinct packages there was a natural inference that a package-by-package evaluation would be carried out.

Although bid evaluations criteria were specific in the conditions of the tender, no suggestion was made that preference might be given to a bidder who bid for all packages.

The explanation as to exactly how the problem had arisen was summarized by Keyser J. in the following words:

“Gary Black testified that the tender proposal was structured in the way it was and broken into six packages because the defendant wanted to try to attract ‘Mom and Pop Operations’ for the concessions. It seems quite apparent that, at the time the tender proposal was set up, the defendant meant to evaluate each package independently. Black testified that, when the tender went out, the defendant fully intended to award six different contracts.

“It obviously did not anticipate an all or nothing bid on the part of one of the bidders. Perhaps because of that, there was no general escape clause put in to allow the defendant the flexibility to consider the packages as a whole if necessary, rather than individually broken down. I find that the defendant in having done so without notice to the bidders of that possibility, treated individuals who bid on fewer than all of the packages unfairly.”

While general reservations of privilege clearly have their function, provisions of this type have been given a relatively narrow construction.

Specifically, clauses of this type do not relieve the contracting authority from the obligation to treat fairly, although such clauses may colour the interpretation as to what is fair.

In the M.J.B Enterprises case, Iacobucci J. discussed whether such privilege a clause was sufficiently broad to entitle a contracting authority to accept a bid that did not comply with the conditions of tender.

Clauses reserving privileges and other rights to the contracting authority are interpreted not in isolation, but rather by reference to the tender documents as a whole.

Where the totality of the documentation creates one impression as to the manner in which the competition will be run as decided, an ambiguous or open-ended reserved privilege clause will not be interpreted so as to negate that impression.

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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