reimagination of pinnochio's long nose but at end dellar bills are falling off it

Background

PWGSC issued an RFP for the design and construction of two buildings and amended the RFP to include a geotechnical report (“Nichols report”) concerning subsurface soil conditions at the construction site.

Maple Reinders (“Maple”) was the successful bidder, and engaged Ptarmigan, an engineering firm, to design the buildings’ foundations. With the owner’s permission, Ptarmigan contacted Nichols to clarify soil friction values, and received a detailed reply: “for the clay till and lower sand, factored skin frictions of 49 and 45 kPa will conservatively satisfy your design criteria”. In engineering terms, the higher the friction values, the less required for foundation construction.

Inaccurate Owner’s Representation

Another of Maple’s contractors suspected that the values were too high, necessitating further investigation which confirmed this suspicion. Nichols had used non-standard methodology to arrive at its values. The project was delayed, and the foundations were redesigned, at significant additional expense.

Court Decision

Maple applied for summary judgment of its claim, which was based on the owner’s inaccurate representation of the soil conditions in the Nichols report. In Maple Reinders Constructors Ltd. v. Canada (Attorney General), 2020 ABQB 58, the court ruled in Maple’s favour, finding that the Nichols report constituted a representation relied upon by Maple in the bidding process, that the reliance was reasonable and appropriate, and that the subsurface conditions “differed materially and substantially from that represented when the contract was bid”. Maple faced a choice – build a substandard foundation causing a defective building or expend the additional costs to construct a building in accordance with engineering protocols. The decision also alludes to PWGSC’s participation in Maple’s choice.

The court awarded Maple over $500,000 in damages, plus interest.

Implications for Procurement Law

The importance of accuracy in bid documents cannot be overstated. As in this case, a successful bidder put to additional costs due to an inaccurate owner’s representation will likely succeed in a damages claim, especially when the representation is material and substantial. Perhaps a more subtle point is that the additional $500,000 paid by the owner resulting from the foundation redesign prior to construction was not an amount arrived at through a competitive process or even through negotiation. Essentially these costs amounted to a direct award to Maple Reinders, as is the case with all unanticipated extras and cost-overruns. Perhaps greater due diligence during the initial assessment of subsurface soil conditions would have saved PWGSC not only significant money and other resources, but also would have avoided the bad press, publicity and inevitable damaged relationships that flow from litigation.

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.