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Procurement Perspectives - Public tender law needs improvement

Stephen Bauld
Procurement Perspectives - Public tender law needs improvement

As I work with contractors bidding for municipal projects, it is clear that much improvement is needed in the area of tender law in government procurement.

In numerous cases, the courts have stated there is a critical need to maintain the "integrity" or "sanctity" of the tendering process.

If anything, it is the 1981 judgment in the Ron Engineering case, which has had the most impact in this area.

In this case, the Supreme Court concluded that in many instances the submission of a response to a call for tenders is, in fact, a contract separate from the eventual contract award.

The cases that have been decided in light of it have had a disturbing effect on the public procurement process.

It is sometimes argued that judicial review of the public contracting process helps to ensure that legal restrictions on the awarding of public contracts are maintained.

Whether this is true is a matter of debate.

It is certainly true that the public has an interest in seeing that public supply contracts are kept to the lowest possible cost — although (particularly at the municipal level) other considerations such as local source of supply are often equally compelling, particularly where the price difference is negligible.

There is no evidence, however, that the law of tender results is keeping government costs low.

What can be said with confidence is that out of the hundreds of cases in which the award of a contract under a tender or RFP have been subject to challenge in Canada, since Ron Engineering was decided, only a handful have involved any overt wrongdoing (in even the widest possible sense) on the part of public procurement staff.

Almost all have involved decisions made in good faith (although perhaps on questionable criteria), to achieve the best possible source of supply for the contracting authority in question.

A supplier or contractor in a tender goes into the process knowing that its chances of winning the contract may be as slim as one-in-10. In contrast, in dealing through private negotiation as in the private sector, it knows its chances of winning the contract are perhaps one-in-three.

There are likely to be many distinctions among so many contractors bidding in a tender that a prudent private sector customer would wish to take into account in deciding which bid to accept.

This probability seems even more certain when none of the suppliers concerned were selected by or even known to the proposed customer at the time of the issue of the tender.

To a rational customer, price is important.

Therefore, it is difficult to see on what basis one infers an implicit understanding that the "low bidder will win" in a tender arrangement.

As we have all seen, prior to the decision in Ron Engineering, the law was clear that there was no entitlement to be awarded a contract merely because a bidder had the lowest bid.

Nevertheless, the tendering process continued to operate quite successfully. It is the courts who have convinced suppliers that they are entitled to be granted a contract.

No doubt, in a tender, the suppliers who bid expect that the low bidder will likely be awarded the contract if all other factors are equal.

But surely that is equally true where the contract is awarded through a process of private negotiation.

In contrast to the law of tender, however, there is no obligation when negotiating a contract to go with the lowest price.

The argument that by positing bid security a supplier purchases a right to fair treatment is also spurious. In practice, bidders do not offer bid security unless it is first demanded by the contracting authority carrying out the tender.

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

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