Alberta Court Of Appeal Speaks To Owner's Discretion In The Bid Process

The Alberta Court of Appeal1 has recently considered the limits on a company's discretion to award the general contract in the tendering process. The teaser is that a company does not have sole and unfettered discretion to award the general contract to any bidder. Rather, the assessment of the bids must be based on the bid criteria provided to the bidders.

Background

In the summer of 2010 the South Fish Creek Recreation Association (Fish Creek) solicited tenders for a planned expansion to the South Fish Creek Recreation Complex, including the addition of two ice surfaces and multi-purpose rooms (the Project). Fish Creek received 11 tenders, 10 of which it deemed compliant with the bid criteria.

The Instruction to Bidders outlined an evaluation matrix that would be the basis for assessing the 10 compliant bids. Up to 100 points were to be allocated under 4 categories: (a) price (35 points); (b) completion date (35 points); (c) experience with arena projects (20 points); and (d) references for arena experience (10 points).

The Instruction to Bidders indicated that August 11, 2011 was the desired completion date, so that the ice surfaces would be ready for the upcoming hockey season. The tender process came down to 2 bids — one from Elan Construction Limited (Elan) and the other from Chandos Construction Ltd. (Chandos). Fish Creek awarded the contract to Chandos.

Elan sued Fish Creek for approximately $700,000 in damages, alleging that Fish Creek wrongfully awarded the general contract to Chandos. Elan specifically challenged Fish Creek's method of awarding points under both the completion date and experience headings.

In the completion date category, Fish Creek awarded 25 points to Elan and 34 points to Chandos. This allocation was made by Fish Creek in spite of Elan proposing an earlier substantial completion date (August 1 vs. August 31) and less time to correct deficiencies (14 days vs. 30 days).

In the experience category, Fish Creek awarded 12 points to Elan and 20 points to Chandos. Elan took issue with Chandos introducing a new site supervisor for its bid after the bid submission deadline had passed. Fish Creek wanted the new site supervisor involved in the Project, and Elan argued that this desire influenced the points allotted under the experience heading, and ultimately improperly motivated Fish Creek to award the contract to Chandos.

The Trial Decision — Elan Wins a Nominal Moral Victory

At trial, the Court found that Fish Creek...