Bid Protest Bulletin - Condo corporation not liable for bid shopping

In its May 2009 decision in Cambridge Plumbing Systems Ltd. v. Strata Plan VR 1632, the British Columbia Supreme Court dismissed an unsuccessful low bidder’s bid shopping claim.

The case involved a tender call issued by a Vancouver condominium corporation for the replacement of a water system.

After receiving bids, the corporation called a special general meeting of its owners and voted against accepting the low bid due to budgetary considerations.

It then negotiated a reduced price contract with another bidder.

The low bidder sued, arguing that the budget considerations constituted undisclosed criteria and that the corporation had engaged in bid shopping.

The court disagreed. Noting a tender call provision that referred to the intention to award to the lowest bid that “does not exceed the funds available”, the court determined that the condo corporation was allowed to bypass the low bidder and seek alternate arrangements for the work:

…there is a possibility that all bids received in any tendering situation may be higher than an owner has anticipated… If all bids are too high, the owner may legitimately reject them all for cost considerations.

Furthermore, surely all parties to a tendering process must reasonably expect that projects are subject to budgets and that not all tenders will fall within that budget.

In many tendering contexts a project will be conditional on receiving the appropriate funding. This is not an “extraneous criterion”; it is a critical criterion that should be implied in the evaluation process.

However, after determining that the condo corporation had the right to bypass the low bid due to financial constraints, the court went on to scrutinize the motivations of the condo owners to determine if they deliberately orchestrated a negative vote at the board meeting as a means of manipulating the tendering process:

Until that process is over, either through acceptance of a bid, rejection of all bids, or when the irrevocability period has lapsed, an owner is obligated to treat all bidders fairly and equally in their assessment of those bids.

This “good faith” obligation is directly connected to the twin principles meant to protect the integrity of the tendering process.

The court ultimately determined that there had been no deliberate manipulation of the tendering process in the circumstances:

However, based on the notes from the special general meeting and the testimony of the strata council members, one of the central concerns for the individual owners was the cost of the Project.

Members of the strata council (Mr. Fraser, Mr. Herstein, Mr. Howitt) testified that, following the April 18, 2006 information meeting with Mr. Jurinak and Mr. Aspinall, the strata owners were confused and concerned about costs, and that Mr. Aspinall did a poor job of explaining costs to them.

In particular, some strata owners were unsure as to what was or was not included in Cambridge’s price.

I find that the evidence does not support a conclusion that the owners or the strata council collectively orchestrated a negative vote in order to end the tendering process and/or enable them to negotiate with any or all of the bidders.

While the low bidder’s claim was ultimately rejected, this case illustrates how a purchaser’s right to terminate a tendering process due to budgetary constraints is not without risk nor is it beyond judicial scrutiny.

In fact, such cancellation decisions remain subject to legal challenge and, as evidenced by this decision, to close scrutiny by the courts to guard against bad faith bid manipulation.

This article is extracted from Paul’s Government Procurement textbook published by LexisNexis Butterworths. Reach Paul at paul.emanuelli@procurementoffice.ca.