Contract A: the Canadian tender law every bidder should know

Most contractors never think about the law of tendering until something goes wrong. But a handful of Supreme Court of Canada decisions shape every formal tender in the country, including the ones BC municipalities post every week. Knowing the basics explains why buyers are so strict, and when they owe you something.

This is general information, not legal advice. If you think a buyer has treated you unfairly, talk to a lawyer quickly: deadlines can be short.

Ron Engineering: two contracts, not one

In a 1981 case, R. v. Ron Engineering, the Supreme Court of Canada described a formal tender as creating two contracts:

• Contract A forms when you submit a bid in response to the tender call. Its terms are the tender's rules: how bids are submitted, how they'll be evaluated, how long they must stay open.
• Contract B is the actual contract for the work, formed when the buyer awards it.

That's why, in many formal tenders, you can't simply withdraw or change your bid after closing: you've agreed to the tender's terms, including any irrevocability period. In Ron Engineering, the contractor discovered a mistake in its price after closing and couldn't take its bid back without losing its bid deposit.

M.J.B.: only compliant bids count

In M.J.B. Enterprises v. Defence Construction (1999), the Court made two points that matter to every bidder:

• Contract A doesn't always form. Whether it does depends on the terms of the tender call. Many informal requests for quotes, and some RFPs, are written to avoid creating it.
• Contract A forms only with a compliant bid. A non-compliant bid doesn't create Contract A, and the buyer generally can't accept it without being unfair to the compliant bidders. Only compliant bidders have a legal remedy if the buyer breaks the process.

The Court also held that a "privilege clause" (the familiar "lowest or any tender not necessarily accepted") doesn't let a buyer accept a non-compliant bid.

This is why a missed signature or addendum can sink a bid. The buyer isn't being petty; accepting your non-compliant bid could expose it to claims from everyone else.

Martel: treat bidders fairly and equally

In Martel Building v. Canada (2000), the Court confirmed an implied duty for the buyer to treat all bidders fairly and equally, unless the tender documents clearly say otherwise. Without it, bidders would waste money preparing bids for processes that could be rigged, and many would stop bidding.

Tercon: the buyer has to follow its own rules

Tercon Contractors v. British Columbia (2010) started with a BC highways contract. The Province accepted a proposal from a bidder that wasn't eligible under the RFP's own rules, and relied on a clause that excluded claims arising from the process. The Supreme Court held the exclusion clause didn't protect the Province from awarding to an ineligible bidder: it couldn't ignore the terms of its own tendering system. Tercon recovered damages of about $3.3 million.

What this means for a small contractor

• Comply exactly. Your protection, and your chance to win, depends on a compliant bid. Build a compliance checklist for every tender.
• Check your price before closing. In a formal tender, you may be held to it, mistakes and all.
• Read the privilege and exclusion clauses. They don't let a buyer ignore its rules, but they do give it room to reject all bids, cancel, or negotiate in ways the documents allow.
• Expect the buyer to follow its own process. If the evaluation doesn't follow the published criteria, ask for a debrief and, if needed, get advice.
• Know which kind of process you're in. A formal invitation to tender, an RFP and an informal request for quotes can create different obligations. The documents usually say.

Why buyers seem so rigid

From outside, public procurement can look like box-ticking. Through the lens of these cases, the rigidity is the point: the buyer has promised every bidder the same rules, and the courts hold it to that promise. The upside for you is that a small, careful crew gets the same treatment as the biggest firm in the province.