Even in the broadest scope, the duty of the contracting authority is not one to bargain in good faith.
A municipality or other public contracting authority conducting a tender has a duty to treat bidders fairly and equally but not necessarily nicely.
The touchstone for determining the obligations of the authority are the terms and conditions governing the tender itself. Those terms may be quite unfair in and of themselves.
For instance, they may allocate risk arbitrarily, they may require the provision of unnecessary information subject to the Human Rights Code and the Discriminatory Business Practices Act, and they may exclude certain bidders or types of bidders as well as limit the range of acceptable goods and services even though a hypothetical reasonable person would not.
In this respect, the law of tender reflects the general law of contract.
Each party is allowed the right to pursue its own ends and determine what is necessary to protect its own interests as it sees best. A contracting authority is no more obligated to be reasonable in its declared choice of what products (or services) to buy and who to buy them from than a supplier is required to submit a bid to supply such products or services although not willing to do so.
By using clear and unambiguous language, the contracting authority may even limit its ability for a breach of a contract. If the supplier does not like the terms and the conditions offered by the municipality, its choice is to refuse to supply.
However, once the terms and conditions are fixed (i.e., when the tender closes), the contracting authority is bound by them. Unless it has reserved such a right, it may not subsequently add to them or take away from them, nor may it act in a manner inconsistent with any implied understanding under which bids were received.
As the Supreme Court has explained in this case:
“Implying a term to be fair and consistent in the assessment of the tender bids is justified on the presumed intentions of the parties. Such implication is necessary to give business efficacy to the tendering process. As discussed, this court agreed to imply a term in M.J.B enterprises that only compliant bids would be accepted since it believed it would make little sense to expose oneself to the risks associated with the tendering process if the tender calling authority was ‘allowed in effect, to circumscribe this process and accept a non-compliant bid.’ ”
Similarly, in light of the costs and efforts associated with preparing and submitting a bid, we find it difficult to believe that a respondent in this case, or any of the other three tenders, would have submitted a bid unless it was understood by those involved that all bidders would be treated fairly and equally.
This implication has a certain degree of obviousness to it to the extent that the parties, if questioned, would clearly agree that this obligation had been assumed.
Implying an obligation to treat all bidders fairly and equally is consistent with the goal of protecting and promoting the integrity of the bidders’ process and benefits all participants involved.
Without this implied term, tenders, whose fate could be predetermined by the same undisclosed standards, would either incur significant expenses in preparing futile bids or ultimately avoid participating in the tender process.
Nevertheless, the tender documents must be examined closely to determine the full extent of the obligations of fair and equal treatment. In order to respect the parties’ intentions and reasonable expectations, such a duty must be defined with due consideration to the express contractual terms of the tender.
A tendering authority has “the right to include stipulations and restrictions and to reserve privileges to itself in the tender documents.”
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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