Tendering and Procurement Best Practices
Transcript of Tendering and Procurement Best Practices
TENDERING AND PROCUREMENT:
BEST PRACTICESTHURSDAY, FEBRUARY 26, 2015
11:00AM-12:30PM
SPEAKERS:
William E. Knutson, QC, Principal, Shapiro Hankinson & Knutson
Mark Braidwood, Principal, Shapiro Hankinson & Knutson
Marc MacEwing, Associate Counsel, Shapiro Hankinson & Knutson
Seema Lal, Principal, Shapiro Hankinson & Knutson
Sponsored by
BASIC PRINCIPLES
Is it a tender?
Contract A/Contract B = implied duty of fairness to all bidders
Damages - Potential liability for breach of Contract A
Privilege Clauses
IS IT A TENDER?
Basic criteria:
• Competitive procurement process
• Period of irrevocability
• Binding form of Contract B
INVITATION TO TENDER
An Invitation to Tender is commonly used when there are numerous potential bidders who can supply goods or services. The bids are evaluated against mandatory criteria.
This type of document is normally used when owners are looking only for the lowest price response that will be accepted without negotiation.
The award should be made in accordance with the criteria stated in the tender documents, although price will generally be considered the most important criteria.
CONTRACT A/CONTRACT B
The fundamental principle of the law of tendering for
construction in Canada is that that method of contract
procurement involves two stages of contractual relationships:
a) Contract A, which arises between the tendering authority and
each “materially compliant” bidder, the terms of which are
generally as set out in the tendering documents; and
b) Contract B, which is the tendered contract entered into
between the tendering authority and the successful
bidder.
DAMAGES
The Contract A/Contract B analysis means that both the
tendering authority and bidders be liable for damages from the
tendering process itself if, for example:
a) an owner purports to award a construction contract to a materially
non-compliant bidder in preference to the lowest compliant bidder;
or
b) a materially compliant bidder refuses to sign a construction
contract and proceed with the work after being awarded the
contract.
NON-COMPLIANCE
Irregularity vs. noncompliance
Waivable non-material non-conformance vs. non-waivable
material nonconformance
Material = affecting the price or performance of Contract B
PRIVILEGE CLAUSES
The lowest or any tender will not necessarily be accepted.
Tender irregularity may be a cause for rejection and can
be waived.
Price + other criteria + best interest can be taken into
consideration.
Limited or no liability for treatment of tender (Tercon).
POOR DRAFTING
Inconsistent provisions
Inclusion of Contract B provisions
Unclear or ungrammatical wording
Inadequately worded privilege clauses
COUNTER-PRODUCTIVE “PHILOSOPHY”
Unreasonable privilege clauses
Complicated tender procedures
Mixing of negotiation with tendering
APPROACHES TO TENDERING
Lack of knowledge of tendering law
Lack of care in setting, understanding and following tender
“rules”
PRACTICE POINTS FOR TENDER
SUBMISSIONS
Have a basic knowledge of tendering law
Read and understand the totality of the procurement
documents
Clarify pre-bid questions using designated process
Quality assurance for tender preparation
Comply with all tender requirements
SUBCONTRACT TENDERS
Contract A/Contract B can apply
General contractor must stick with subcontract bid if it is
expressly picked up in GC’s tender
If it is reasonably foreseeable that awarding contract to non-
compliant bidder would result in damages to subcontractor,
tendering owner may be liable to subcontractor for its damages
BID SHOPPING
“…where a tendering authority uses the bids submitted to it as a
negotiating tool, whether expressly or in a more clandestine way,
before the construction contract has been awarded, with a view to
obtain a better price or other contractual advantage from that
particular tenderer or any of the others.”
Town of Port Hawkesbury v Borcherdt Concrete
BID SHOPPING (CONT.)
Integrity and efficiency of the tender process depends on
parties not seeking unfair advantage and, in particular, by not
bid shopping
Consultants may be exposed to liability if their negligence or
breach of contract leads the tendering party/owner to breach its
bid contract with one or more tenderers (Stanco Projects v Her
Majesty the Queen et al)
BID SHOPPING (CONT.)
Examples of conduct that could be considered bid shopping:
• Stanco Projects – using a bid supplied by a tenderer to negotiate
lower prices with another tenderer or third party (during the tender
period)
• Dynasty Roofing – prime contractor, after being awarded contract
by the Owner, using lowest bid from subcontractor as basis to
bargain an even lower price with second lowest subcontractor
• Town of Port Hawkesbury – the tendering authority breached
duties of fairness owed to the only bidder by awarding the contract
to itself prior to formally terminating the tender process
BID RIGGING
Involves a secret agreement on bids or tenders to frustrate or
manipulate competitive bidding process
It is a criminal offence under s. 47(2) of the Competition Act,
RSC 1985, c. 34
• Could lead to fines or imprisonment up to 14 years
BID RIGGING (CONT.)
47. (1) In this section, “bid-rigging” means
(a) an agreement or arrangement between or among two or more persons
whereby one or more of those persons agrees or undertakes not to submit a
bid or tender in response to a call or request for bids or tenders, or agrees or
undertakes to withdraw a bid or tender submitted in response to such a call
or request, or
(b) the submission, in response to a call or request for bids or tenders, of
bids or tenders that are arrived at by agreement or arrangement between or
among two or more bidders or tenderers,
where the agreement or arrangement is not made known to the person calling for
or requesting the bids or tenders at or before the time when any bid or tender is
submitted or withdrawn, as the case may be, by any person who is a party to the
agreement or arrangement.
SHK LAW CORPORATION
Bill Knutson, QC 604.408.2030 ([email protected])
Seema Lal 604.408.2026 ([email protected])
Mark Braidwood 604.408.2021 ([email protected])
Marc MacEwing 604.408.2031 ([email protected])