The argument that governments should be bound to treat suppliers fairly seems consistent with general principles of public law, for suppliers are citizens or are owned by citizens, and surely citizens have the right to fair treatment by their government.
However, the merit of any rule of law, whether statutory or common law, must be based on its impact and those who are subject to it. The requirements of sound commercial law are no unsolved mystery.
In relation to the law of contract, the business place requires clear rules that can be easily explained and applied to prospective transactions and executory contracts.
Where disputes arise, the outcome of those disputes should be predictable so that the parties may resolve their differences through negotiation and move on to other things, since neither business nor government exists for the purpose of litigation. As the Canadian law of tender has evolved it has proven to be highly litigious. It is overly vague.
Unless one assumes governments across Canada derive special pleasure out of spending hundreds of thousands of dollars in legal costs, litigating tender-related disputes to the highest level of court that will hear them, the hundreds of decided cases in relation to tender issues over the past 20 years demonstrate the tests set down for assessing are difficult to explain, hard to apply in practice and do not permit the outcome of disputes to be predicted with sufficient certainty to allow ready settlement.
Litigious commercial laws undermine both business and government. They divert attention away from new transactions towards the solution of past disagreement. They consume time and human resources that would be better directed to other matters. One option would be to scrap the law of tender in its entirety.
Such a drastic solution would almost certainly require a legislative solution. There is at least an argument in favour of this approach.
The sole benefit of this branch of law from the purchaser’s perspective is that it allows the purchaser to assume it has received a binding bid. Yet in fact the law does not give such assurance in any unqualified sense.
If the bidder argues that it made a mistake in submitting its bid, the court will require the purchaser to establish that the mistake was one which should not have been obvious.
The only circumstance in which this condition is likely to be satisfied is where the bid in question is reasonably close to the bids received from other suppliers.
By simple common sense, if there is a substantial disparity, that fact alone suggests the bidder probably has made a mistake.
Even in the limited cases in which governments have the benefit of being able to rely on the bids received, it has never been clear to me what benefit is served by effectively forcing an unwilling “successful” bidder to take up a contract.
Such a contract starts off on the completely wrong footing and is unlikely to be anything but problematic from, to use a construction metaphor, the time when the first shovel is put into the ground until the time when the building concerned is eventually demolished.
A bidder who has underpriced a contract will cut corners wherever possible and argue for a change order if the customer does so much as suggest he tie his work boots. Any rational purchaser in such a case will simply tell the supplier to be on his way.
Thus, the supposed symmetry and reciprocity of the law of tender is completely illusory.
In practice, the Canadian law of tender operates solely for the benefit of suppliers. It gives the suppliers rights though they are in essence bound to nothing. This is a complete inversion of what ought to be the case.
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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