News that the global economy is on the mend is translating into a renewed construction industry in Ontario, particularly with the infusion of infrastructure dollars from various levels of government. From Sudbury to Sarnia, towns and cities are re-investing in new or renovated infrastructure projects. The recent Court of Appeal decision in Maystar General Contractors Inc. v. Newmarket (Town), [2009] O.J. No. 3939 (“Maystar”) comes at a time of new momentum and offers the right entry-point into discussions about certainty, predictability and clarity in Tender Law.

In Maystar, the Court of Appeal considered the issue of price uncertainty in the bidding process and the effect of non-compliance on the validity of the bid. The Court of Appeal upheld the lower court’s finding of breach of contract between the Town of Newmarket and Maystar, an unsuccessful bidder.

In July 2005, the Town of Newmarket issued a Tender Notice for the construction of a recreational facility in Newmarket; four bids were received. Bondfield, the successful bidder, submitted a bid that was found to contain two critical errors: (i) the Goods and Services Tax was listed at 5% instead of the correct 7%; (ii) this resulted in an arithmetic error leading to an incorrect Total Bid Price. Bondfield’s error in calculation produced a bid that appeared to be the lowest bidder, at first glance. The four bids were read aloud at a Bid Opening with all bidders present. The bids were later reviewed by the Project team and Bondfield’s error was discovered then. Although Maystar had submitted a compliant bid, which was also the lowest bid, Bondfield’s proposal was accepted.

The Court of Appeal upheld the lower court’s decision that the error in Bondfield’s bid was not “clear on its fact” and that an essential term of the bid – the price – was mistaken. As a result, the bid was non-compliant with the process and therefore not capable of being considered. The Court distinguished this case from Bradscot (MCL) Ltd. v. Hamilton-Wentworth Catholic District School Board, 1999 CanLII 2733 (ON C.A.) in which then Court of Appeal allowed a bid that contained an error. In Bradscot the bid form was different and the error was deemed “superfluous” because it simply incorrectly summarized information that was otherwise correctly stated in the body of the form.

It may be time to legislate the bidding process

Commentary about Maystar tends to focus on the proposition that good faith is not a defence to a non-compliant bid. However, this case raises another issue with respect to the degree of clarity required to control one’s own contractual process.

The Town of Newmarket drafted clear articles in the Instructions to Bidders that situated control of the process squarely in its own the hands. Article 1.11.2 provided that “The Bidder acknowledges that the Owner may rely upon the criteria, which the Owner deems relevant, even though such criteria may not have been disclosed to the Bidder.” [My emphasis]. The Town attempted to reserve the right to choose whichever bid it felt was most suitable to the Town’s needs – not necessarily the lowest bid price. Moreover, article 1.12.3.7 waived “any informalities, requirements, discrepancies, errors, omissions, or any other defects or deficiencies in any Bid Form or Bid submission”, and article 1.12.3.8 allowed the Town to “[a]ccept or reject any unbalanced, irregular, or informal Bids”. Despite such clear articles and waivers, the court intervened and held the bid to be non-compliant and the successful bidder to be invalid from consideration.

With such unambiguous terms in the Instruction to Bidders, does this case decision provide more clarity about the tendering process or does it essentially render waivers in the Instructions to Bidders useless in the face of court interference? Is the “Contract A”/”Contract B” legal fiction first established by the Supreme Court of Canada in The Queen (Ont.) v. Ron Engineering, [1981] 1 S.C.R. 111, the most efficacious and transparent means for governing the bidding process? Watchers are also paying attention to the Tercon Contractors Ltd. v. British Columbia case to see how the Supreme Court of Canada deals with the waiver issue (more on that later!)

Arguably, it is time for the Province of Ontario to legislate the bidding process and create clear guidelines of acceptable practice. The tendering process for large construction projects involves substantial resource investments in time, innovation, and development. The bidding process should not be shepherded by the courts but rather governed by clear legislation that provides standardized and predictable rules of game. A common law duty to treat all compliant bidders fairly and equally, as established in Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860, is not enough. Currently, developers and owners alike draft Instructions with a hope that their terms and waivers will apply. The Maystar case serves as an excellent example of a waiver that unequivocally intended to allow the Town to choose whichever bidder it found to be best placed for the project, for whatever reason.

A recovering economy and the real prospective of a strongly resurging construction industry should catalyze movements for greater certainty and predictability in Tender Law. The Maystar decision provides an opportunity to kick-start the consultation process and get all stakeholders thinking about and contributing to the possibility of future legislation in Ontario.

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