Town Liable for not Awarding Contract to Lowest Bidder

The process of evaluating tenders and awarding contracts can be tricky business and when done improperly can expose municipal units to significant liability. The recent Nova Scotia case of C.F. Construction Ltd. v. Town of Westville, 2018 NSSC 123, is a good example of the issues that can arise in the tender process.

These are the facts. The Town wanted to upgrade its sanitary sewer system. The Town retained a third-party engineering firm which estimated the probable construction cost at $655,000. A tender call for bids was issued seeking lump sum prices to complete the work. Four bids were received: $572,000, $674,000, $845,000 and $1,132,000. The lowest bid was from C.F. Construction Ltd.

When the bids were evaluated the engineering firm was concerned that C.F.’s bid was too low as C.F.’s bid was almost $100,000 less than the firm’s estimate. After communications between the engineer and C.F., the engineer concluded that C.F.’s bid included a cast-in-place concrete wet well rather than the pre-cast wet well specified in the tender documents. In addition, the engineer asked C.F. to break-down its lump sum price and C.F. did not respond. As a result, the engineering firm considered C.F.’s bid non-compliant and recommended awarding the contract to the next lowest bidder. The Town followed that advice. C.F. sued, alleging its bid was compliant and that it should have been awarded the contract.

The Court found that C.F.’s bid included the pre-cast wet well specified in the tender and that the engineer must have misunderstood his conversation with C.F. on this issue. As a result, C.F.’s bid was compliant.

In discussing bid compliance the Court noted the following:

  • The test for compliance is “substantial” compliance not strict compliance;
  • There is no duty on an owner to investigate bids;
  • Taking post-bid conduct and views into account (as was done here with the communications between C.F. and the engineer) is inconsistent with the requirement that compliance be evaluated objectively at the time the bid is submitted; and,
  • Since the tender did not require a price breakdown, evaluating C.F.’s bid based on its failure to provide a breakdown resulted in evaluating based on undisclosed criteria which was a breach of the duty to fairness to treat all bidders equally.

The Court was satisfied that but for the Town’s breach, C.F. would have been awarded the contract. It ordered the Town to pay C.F. $343,745 plus HST, representing its estimated lost profit from the project and a change order that it found would have been issued to C.F. had it been awarded the work.

This decision is a good reminder of the duty to treat all bidders fairly and evaluate bid compliance based on what is known at the time of bid submission. Bids must be evaluated objectively based on the terms of the tender. Jumping to conclusions on bid compliance based on bid price and evaluating bids based on undisclosed criteria must be avoided.