Although there is the odd deviant, obeying the law is important!

The Laws of Tendering

“Law is a bottomless pit; it is a cormorant,–a harpy that devours everything” – Jonathan Swift (1667-1745) prophesizes the current condition of Engineering Law and Ethics as taught at any major university.

For those of you engineers out there reading this blog, you too had to sit through a law course in your undergraduate career. If there is as much similarity between this writer, his old classmates, and the rest of the engineering demographic in the known universe as can be reasonably assumed, then engineering law and ethics was the class we all skipped in our desperate attempts to get a decent passing grade in concrete and steel. With that in mind, this article will cover the section of course notes on tendering that we burnt after the final exam, which perhaps is more interesting to all of us now that we have to be professional engineers while avoiding being sued by everyone under the sun.

What is a tender and how does it work?

Tender? Steam Tender? …Delicious Chicken Tenders?

Tendering, although a word which may make the more childish of us imagine “choo-choo” trains, is actually an important process which governs the course of every partnership between a contractor and an owner. Tenders begin when an owner decides to build something; the owner prepares design drawings, specifications, engineering reports, and a tender form which are released in a package for contractors to use as a means to bid for the job. When a contractor bids on a job, the submittal of their bid is the tender. The contractor’s tender consists of an estimate of material, labour, equipment, subcontractor, and local costs. The system is designed to work such that the contractors will submit their tenders by a deadline set by the owner, the owner will select the best tender, and the work will be carried out by that selected contractor. However, for those of us who managed to make it to at least one of the law classes, we were able to learn that things are never that simple…

The legalities of tendering

Submitting tenders, like joining the Stonecutters, becomes a legally binding contract

The legalities of the tendering process today are designed to promote competition and the fair awarding of contracts; three famous legal cases have helped develop and highlight the workings of this system.

Firstly, the 1981 case of R. v. Ron Engineering and Construction (Eastern) Ltd introduced the system of Contract A and Contract B. This case changed the concept of a submitted tender from an offer to a contract; there is now contractual obligation (Contract A) for the owner to fairly award the contract based on the criteria within the request for bids and that the contractors must satisfy the requirements of that request. Once the owner selects a winning bid, the contract moves forward for construction and becomes Contract B. In short, before this case was completed the owner could select whichever contract they liked best regardless of their biases or of how closely each contractor met the requirements of the request for bidding, which was very detrimental to the business of contractors who were unfairly neglected by the owner or who diligently met the rules of the request where the winner may have failed to meet criteria but then became a better choice for the owner.

The second case was in 1999; MJB. Enterprises v. Defence Construction Ltd defined Contract A’s as to only exist where the contractor’s tender complies with the entirety of the request. This requirement helps solidify the competitiveness of the bidding process because now all contractors must try to win the bid while strictly adhering to the constraints of the request. In addition, this case identified that the lowest bid contract of all compliant contracts may not be the best contract, and allows owners to select winning contracts based on what is truly the best bid as set out by the request.

The third case was Martel Building Ltd v. Canada in 2000, which found that although the owner must treat all bidders fairly, that fairness is derived by the definition of the request for bids. If the request for bids contains reservations such as accepting or rejecting any tender, not accepting the lowest bid, overlooking minor errors, adding or deleting items, or the right to selectively negotiate, then those are the rights that the owner must legally act in mind with; this is not to say privilege clauses allow an owner to do what they want, rather that they must be fair in the use of their privileges.

Claiming damages in tendering

If you lose a bid due to unfair or negligent practice, you’re not hooped yet

So now we’re professional engineers and just like in third grade soccer the team captain (owner) didn’t pick you (the contractor) first (winning bid). Well don’t get all teary-eyed yet, because if you thought you were your class’s David Beckham (winning bid) then maybe the team captain picked Johnny Slowrunner (undeserving bid) first only because they grew up on the same street (secret preferences); now you have rights to damages.

Damages can exist either contractually or in tort through the tendering process. Contractual damages exist where the contract agreement between the owner and the contractor is broken; in the case of tendering, if the owner broke a rule in their Contract A with a contractor, then that contractor could claim damages. Damages in tort exist where one of the parties is held liable for the damage suffered by the other party, due to a degree of owed care which was reasonably foreseeable and negligently dealt with.

The damages owed are a function of the contract and the amount. If the request for bids contains clauses with respect to damages, they will govern the awarding of damages, as all parties who submit tenders are agreeing to the terms of the request. Following the request clauses, the awarded damages will be a function of how much damage was suffered. For example, if a Contract A is broken by the owner where the contractor adhered to the bid rules, the contractor may be refunded their bid bond (their deposit), the cost of their bid preparation, or both. If a Contract A is broken by the owner to the extent that if it was not, the contractor would have been selected over a different bid which did win, that contractor may be rewarded their lost profits associated with the loss of Contract B.

Conclusion

Common class participation in Engineering Law and Ethics

The tendering process is now more fair and competitive; as long as your hard work obliges the rules of the tender as a contractor or you award tenders fairly and logically as an owner, you will be successful and will not get into trouble. Well then, no more law! NO MORE LAW! It’s been 3 hours and all of your classmates either went home on the last 10 minute break or are sound asleep, drooling, with their heads on their desks because it’s 10pm and you’re still on campus because they only teach law at night. Don’t fret though, this is your last paragraph and you’re still awake so now you get to read the line that you looked forward to for all of those 3 hours every week: “That is all for today, thank you!”

Citations

[1] Richler, Joel. (2002). Tender Law in Canada: Practical Implications. Blakes: Business is our signature. Retrieved Thursday, September 17, 2009, from http://www.blakes.com/english/view.asp?ID=289

[2] Miller, Deidre P.Eng. (NA). Tendering Issues. Law for Professional Engineers: Week , Course Notes.