Think twice and seek legal advice before accepting a defective tender bid
Amanda M. Magee, Associate
Phone: 604-685-5438
Email: amm@lmlaw.ca
The recent BC Court of Appeal decision Maglio Installations Ltd v. Castlegar (City), 2018 BCCA 80 is a cautionary tale for any strata corporation putting out a call for tenders.
In that case, the City of Castlegar had issued a call for tenders for the construction of a recreational swimming area. The invitation to tender included a discretion clause (sometimes called a “privilege” clause) allowing the City to reject any or all tenders, to waive defects in any bid, and to accept any offer it considered to be in its best interest. Engineers working with strata corporations usually include such clauses in the bid documents that they prepare for strata corporations.
The plaintiff in the action, Maglio Installations Ltd., had submitted a fully compliant bid but wasn’t picked for the project. Instead, the City selected Marwest Industries Ltd. The problem was that Marwest’s bid was not entirely compliant with the instructions in the invitation to tender. The invitation required bidders to complete a “preliminary construction schedule” and to confirm their availability to comply with certain construction milestone dates put out by the City. The bid submitted by Marwest didn’t contain a preliminary construction schedule, but Maglio’s did.
Maglio sued the City for breach of contract, arguing that the City accepted a bid that was materially non-compliant. The law of tendering in B.C. does not allow an owner to accept a bid that contains a “material” defect even where the tender documents contain a discretion clause that entitles the owner to select any bid.
At a summary trial, the trial judge agreed with Maglio and found that Marwest’s failure to include the preliminary construction schedule in its bid was a defect material enough to preclude the City from relying on its discretion clause to waive that defect.
The City appealed the trial judge’s decision to the BC Court of Appeal, arguing that the judged erred in finding the defect was material. The City argued that there was little significance in the preliminary construction schedule since the date to commence construction had been extended numerous times in the bid period and construction milestone dates were unconfirmed at the tender closing date.
The Court of Appeal upheld the trial judge’s decision, finding that the invitation to tender supported the conclusion that estimates as to timing and duration of the project were material to the performance of the construction contract. It pointed to the fact that the construction schedule was mandatory according to the tender documents, and an entire page of the tender documents was devoted to it. The invitation to tender as a whole also made it clear that timing would be an essential aspect of the contract. The appeal was dismissed and the City was ordered to pay damages to Maglio.
This decision underscores the importance of: 1) having an invitation for tenders reviewed by a lawyer BEFORE it goes out to prospective bidders; and 2) obtaining legal advice when considering accepting a non-compliant bid, even if your invitation to tender contains a discretion clause. This point cannot be stressed enough!
WHAT WE DO: Lesperance Mendes has been advising strata corporations on repair projects and tendering issues since 1997. If your strata corporation requires legal advice with respect to tendering issues, please contact Paul G. Mendes, Partner, at 604-685-4894 or by email at pgm@lmlaw.ca.