Important Supreme Court Decision on Tendering Process

The Supreme Court of Canada has overturned a decision of the British Columbia Court of Appeal in a high profile court case with significant ramifications for the design and construction sector. The principles of the case apply to not only bidding processes for construction and other contracts, but also the selection processes for engaging consultants. They also reinforce the industry’s consistently- expressed need for a level playing field when it comes to determining which contractors and consultants become engaged on projects. The case, Tercon Contractors Ltd. v. Her Majesty the Queen in Right of the Province of British Columbia, by her Ministry of Transportation and Highways, focused on exclusionary clauses in provincial tender calls. The court found that a particular exclusion clause in the RFP for construction services in question could not be interpreted to shield the owner from liability for accepting a proposal that was submitted by an ineligible proponent (and so non-compliant with the terms of the RFP). This decision has implications for the drafting of procurement documents and the owner’s conduct throughout the process. In its judgment, the court noted that “The Province breached the express provisions of the tendering contract with Tercon by accepting a bid from a party who should not even have been permitted to participate in the tender process and by ultimately awarding the work to that ineligible bidder. This egregious conduct by the Province also breached the implied duty of fairness to bidders. The exclusion clause, which barred claims for compensation ‘as a result of participating’ in the tendering process, did not, when properly interpreted, exclude Tercon’s claim for damages. By considering a bid from an ineligible bidder, the Province not only acted in a way that breached the express and implied terms of the contract, it did so in a manner that was an affront to the integrity and business efficacy of the tendering process.” The decision of the nine-member panel was by close majority judgment, five judges to four. The full decision is available online at http://scc.lexum.umontreal.ca/en/2010/2010scc4/2010scc4.pdf. The supporting affidavit provided by the AIBC as part of the initial proceedings is also available here.