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A Waived Conditional Bid or Material Non-Compliance? You Be the Judge

Surespan Construction Ltd. v. The Government of Saskatchewan, 2017 SKQB 55

Through the Ministry of Highways and Transportation (“the Ministry”), the Government of Saskatchewan issued an Invitation to Tender for providing the steel to construct a bridge over the South Saskatchewan River near St. Louis. Specifically, the Invitation required the “supply, fabrication, delivery and erection of structural steel.” The Invitation was issued in May 2011 and contained various provisions, two of which are relevant to this case and are described below.

Two companies submitted bids, the plaintiff Surespan Construction Ltd. (“Surespan”) and Structal Bridges (“Structal Bridges”). The latter is a division of Canam Group Inc. Both companies issued bids substantially higher than the Ministry’s cost estimate. The Ministry rejected both as non-compliant, cancelled the competition and re-issued the project as two separate pieces of work.

Surespan, one of the bidding parties, claimed that their bid was in fact compliant, and that upon their submission of it Contract A was formed. Surespan further claimed that the Ministry failed to act in good faith, and sought damages for lost profit. The portion of Surespan’s bid that substantially differed from the Ministry’s estimate was its estimate for the steel erection: Surespan’s estimate was nearly $3 million higher than the Ministry’s.

Two of the provisions in the Invitation are here relevant. First, bidders were required to meet certain Occupational Health and Safety Requirements. Second, and central to this case, required contractors to hold a prescribed Canadian Welding Bureau (“CWB”) certification. In the structural and erecting industry, companies are mandated to be certified by the CWB. The criteria for the standard specified in the Invitation is set by The Canadian Standards Association, and companies who seek certification to this standard must qualify their welding supervisors, and welding engineers, and welding personnel, along with submitting for review and approval their welding procedures. Companies can be certified in one of three divisions depending on the work they want to carry out.

Surespan was certified in Division 2, but not Division 1, either before submitting its bid or at any time after. When asked by a Ministry representative if Surespan had the required Division 1 certification, Surespan’s Chief Estimator/Project Manager, Bradley Gunnlaugson, replied that while Surespan did not, the subcontractor they would hire to do steel fabrication would, although he later admitted he had not asked any potential subcontractors if they had the necessary certification. The Ministry employees did not consider whether Mr. Gunnlaugson’s statement rendered the bid compliant. They did recommend that Surespan’s bid be accepted, even though it was higher than the Ministry’s estimate, because of the proposed construction schedule. An Award letter was prepared and signed, but without informing Surespan.

Shortly before the Award letter was to be mailed, a representative from Structal got in touch with the Ministry to let them know that they doubted that Surespan held the required welding certification. The Ministry became worried that if Surespan’s bid was non-compliant and Surespan was awarded the contract, Structal could claim against the Ministry. Thus the Ministry put the tendering process on hold.

By the end of June 2011, the Ministry’s legal counsel had finished their evaluations of the bids and informed the Ministry that both Surespan’s and Structal’s bids were non-compliant. Between that information and the Ministry’s opinion that it could save money by splitting the work into two separate contracts, the Ministry decided to reject both bids and cancel the competition. The Ministry submitted that as Surespan’s bid was either non-compliant or conditional, Contract A could not have been formed. Surespan submitted that since at the time of bid submission it was a bidder and not a contractor, the special provision requiring the certification was not applicable to them, and was applicable only to the subcontractor Surespan would engage. Surespan further argued that should it be wrong on that point, the provision only required Surespan to be certified upon being awarded Contract B.

Was the Ministry wrong to cancel the competition? You Be the Judge.

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The judge ruled against the plaintiff in a summary judgment, holding that Surespan’s bid was non-compliant to the Invitation to Tender.

In the decision, the judge reviewed basic tendering principles, noting that Ron Engineering established that a contract between an owner and a bidder – Contract A – comes into existence once the bidder submits a compliant bid. The second contract – Contract B – is formed once the owner accepts a compliant bid. Contract A can still impose some obligations on the parties, including that an owner will treat all bidders fairly and equally. However, owners can still include some reservations or stipulations, so long as that implied duty is not breached.

Ultimately, the provision requiring Division 1 welding certification was held by the judge to refer to one entity: the bidder/contractor, and found that the purpose of that provision was to make it clear that unless a bidder held the requisite certification, it was not eligible to be awarded Contract B. Thus Surespan’s bid was non-compliant. By indicating that it would get certification prior to any fabrication, Surespan had submitted a conditional bid, which the Invitation had expressly stated was sufficient reason for a bid to be rejected.

As the Ministry was held not to have breached its obligations to Surespan, no damages were granted.

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Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case.  For any particular legal problem, seek advice directly from your lawyer or in-house counsel.  All dates, contact information and website addresses were current at the time of original publication.