eCaseNote 2007 No. 02

The Bidder’s Promise: A Wolf in Sheep’s Clothing?

Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3.

In January 2007, the Supreme Court of Canada handed down its decision in the above cited case. The importance of the case lies in the Court’s interpretation of the rights and obligations of the issuer of a tender when faced with a bid that may be compliant on its face but is ultimately not. We believe a brief review of the tender process and the case would be beneficial to our clients.

To begin, a review of the separate contracts in the tender process is in order, being the initial tender (Contract A) and the winning bidder’s agreement with the issuer (Contract B). When a tender call is issued an initial contract, known as Contract A, is formed between the issuer and each bidder. This contract ensures that the issuer will only accept compliant bids, evaluate them fairly and equally, and choose the tender that is the lowest cost, subject to any specific clauses in the tender. After choosing a successful bidder, the specifics of the tender from Contract A form the content of another contract, known as Contract B, which is for the good or service that that issuer ultimately wants delivered.

In this case, the City of Edmonton held a tendering process for the supply of heavy mobile equipment and operators for handling refuse at a landfill site. One of the major stipulations of this tender was that the equipment to be supplied must be a 1980 model or newer. The two lowest bidders were Double N Earthmovers Ltd. and Sureway Construction of Alberta Ltd., with Sureway being the lowest. Sureway’s bid stated that it was in compliance with City’s equipment requirement. As it turned out, this wasn’t the case. Double N had suspicions of this, and brought them to the attention of the City. However, the City did not investigate the matter and awarded the contract to Sureway. The City learned, after Contract A was completed and Contract B begun, that Sureway could not supply 1980 or newer equipment. The City decided to proceed with the contract regardless of that fact.

The major issue in this case was whether the City, upon notification from Double N of possible noncompliance in Sureway’s bid, should have taken it upon itself to discover for certain the non-compliance and reject Sureway’s bid. The Court disagreed, and determined that to impose a duty on owners to investigate whether a bidder will be able to comply with the terms of its bid would overwhelm and ultimately frustrate the tender process.

Double N also argued that, by accepting the Sureway offer and then negotiating a different Contract B than was required in the tender, the City was in violation of its implied duty of equality and fairness to all bidders. The Court again disagreed, stating that this implied duty ended with the completion of Contract A and the formation of Contract B. Changes to Contract B after Contract A has been completed are within the discretion of the parties to the contract, provided there is no evidence of collusion between the parties.

These are important clarifications by the Supreme Court of Canada on the tendering process. Should you wish to receive a full copy of this decision or discuss its implications, feel free to contact our office.

The comments contained in this eCaseNote provide general information only and should not be construed as legal advice or opinion. For more information or specific advice on matters of interest, please call our offices at (709) 579-2081.