In its decision in Chinook Aggregates Ltd. v. Abbotsford (District), the British Columbia Court of Appeal held that an owner cannot rely on a privilege clause to apply undisclosed evaluation criteria. The case involved a tender call for a gravel crushing contract. The municipal policy was to award contracts to local bidders who were within 10 per cent of the lowest bid, but it had not disclosed that to the bidders.
In its decision in Chinook Aggregates Ltd. v. Abbotsford (District), the British Columbia Court of Appeal held that an owner cannot rely on a privilege clause to apply undisclosed evaluation criteria.
The case involved a municipal tender call for a gravel crushing contract. The municipality had adopted an undisclosed local preference policy and awarded contracts to local bidders who were within 10 per cent of the lowest bid. The plaintiff challenged the contract award made on the basis of the hidden preference. The Court of Appeal described the undisclosed local preference policy and its impact on the bidding process:
The appellant had made a considered decision prior to inviting tenders, not to give notice of its local preference policy to bidders in its instructions to bidders. Officials of the municipality considered that if notice was given this might alert local contractors to the fact that they were afforded a preference. Presumably the appellant considered that the absence of notice would give it a price advantage. On the other hand, outside contractors such as the respondent believed that they were on an equal footing with all bidders. Mr. Tanner, the principal officer of the respondent, testified that if he had been aware that the appellant might apply a local preference in favour of local contractors up to ten per cent over the lowest bid, he would not have bid on the job because it would have been virtually impossible, in view of the competitive market, for him to bid ten per cent lower than the lowest bidder.
The municipality argued that the privilege clause in its tender call gave it “the right to select any tender made by any qualified bidder, not just the lowest tender”. The Court of Appeal disagreed since it was “unable to accept counsel’s submission that the privilege clause gave the appellant the right to exercise a local preference when that local preference was not revealed by, or stated in, the tender documents”. Furthermore, the Court of Appeal found that unless the tender call expressly stated otherwise, the implied industry practice was to award to the low bidder:
… the trial judge found that the custom and usage in the tendering process was in accordance with the opinions of Mr. Brawner and Mr. Ouimet. I interpret his reasons to mean that he found that there was a custom and usage in the construction industry indicated by the evidence of those experts that in the absence of notice from the owner of preferential rules or criteria for the award of a contract, then all the participants in the industry acted on the principle that the low qualified bidder got the job.
In my opinion, there was evidence upon which the trial judge was entitled to reach that conclusion. I am unable to find that he erred in principle or committed palpable error in reaching that conclusion.
As this case illustrates, in appropriate circumstances a privilege clause may relieve an owner of its implied duty to award to the lowest bidder. However, if an owner wants to rely on specific evaluation factors other than price then those factors should be disclosed in the tender call.
While an owner is always free to argue that specific undisclosed evaluation factors fall within prevailing industry norms, the practical reality is that industry practices are often subject to interpretation and debate. An owner should clearly disclose the evaluation factors it intends to rely on in order to protect itself against challenges to its evaluation process.
Paul Emanuelli's procurement law practice focuses on all aspects of the tendering cycle including bid dispute resolution. This article is extracted from his Government Procurement textbook published by LexisNexis Butterworths. Paul can be reached at paul.emanuelli@procurementoffice.ca
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