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The Law of Tender and Its Complexities

April 19, 2016

In 2014, the Ontario Court of Appeal dealt with a complex case, Rankin Construction Inc. v. Ontario, 2014 ONCA 636, referring to the Ministry of Transportation’s “call for tenders” – meaning that, in 2005, the Ministry of Transportation was calling for services, as well as products, mainly steel, in order to expand Highway 406 in Niagara. 

Those who responded to the call for tenders, called “bidders,” though in this case they were contractors, were told to adhere to a set of documents called tender documents that set out a number of provisions. One of those requirements included listing the amount and value of imported steel that the bidders intended to use on the project. Imported steel was defined as any steel manufactured outside of Canada. Any steel manufactured in Canada would give the bidders a 10% discount. 

The appellant in this case, Rankin Construction Inc., mistakenly believed that a steel component required for the highway expansion was manufactured in Canada. The Ministry of Transportation was choosing a bidder based on the lowest cost associated with the material and the project, labelled the “Adjusted Tender Amount” on the tender documents. This mistake resulted in giving Rankin Construction Inc. the lowest overall and adjusted tender amount. A rival bidder, Hard Rock Paving, brought this to the Ministry of Transportation’s attention, stating their bid was non-compliant with the terms of the tender document. After an investigation, during which the appellant was asked to consult with their supplier, the appellant was notified that as there were no manufacturers of the specified material in Canada, it was considered domestic even though it was manufactured in the states. However, according to the terms set out by the tender document, the material was still considered imported. Rankin Construction Inc. conceded this as well. 

Following the investigation, a phone call was made and a letter faxed to Rankin Construction Inc. notifying them that their bid was non-compliant. Hard Rock, having the lowest total and adjusted tender amount, was given the contract. 

In reaction to the loss of the contract, Rankin Construction Inc. initiated an action against the Ministry of Transportation for damages as a result of lost profits totalling $5,000,000. A trial commenced, and within six days the action was dismissed. 

The Ontario Court of Appeal also dismissed the appeal, and ordered the appellant to pay costs in the amount of $10,000. Essentially, both the trial judge and the appeals judge decided that an allegation of non-compliance was open to be investigated; though the mistake was technically a “formality” that could be waived, this one could be seen as more material and could open the respondent up to further action by other bidders; and finally, though the appellant drew on the respondent’s clause that they shall not be liable for costs or expenses unless they are due to the tender documents, and attempted to prove that the Ministry of Transportation came to its conclusion to cancel their contract following an investigation which was not authorized, the court disagreed and felt the language of the exculpatory clause was explicit. 

The law of tender is complicated, and this decision shows how difficult it is to balance the bidders and their interests with those of the companies or organizations looking for services or goods within the constraints of their contract. 

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